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Polluting thy neighbor: Unintended consequences of China׳s pollution reduction mandates

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  • Cai, Hongbin
  • Chen, Yuyu
  • Gong, Qing

Abstract

This paper studies how the pollution reduction mandates imposed by China׳s central government in 2001 triggered unanticipated responses from its provinces. We apply the difference-in-differences-in-differences (DDD) method to a unique dataset on industry-level activities in counties along 24 major rivers in China from 1998 through 2008. We find that the most downstream county of a province has up to 20 percent more water-polluting activities than otherwise identical counties since 2001. Moreover, we find that the enforcement of pollution fee collection is more lenient in the most downstream county of a province, and that private firms contribute more to the downstream effect than state-owned enterprises and foreign firms. These findings are consistent with the hypothesis that the provincial governments respond to the pollution reduction mandates by shifting their enforcement efforts away from the most downstream county.

Suggested Citation

  • Cai, Hongbin & Chen, Yuyu & Gong, Qing, 2016. "Polluting thy neighbor: Unintended consequences of China׳s pollution reduction mandates," Journal of Environmental Economics and Management, Elsevier, vol. 76(C), pages 86-104.
  • Handle: RePEc:eee:jeeman:v:76:y:2016:i:c:p:86-104
    DOI: 10.1016/j.jeem.2015.01.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Water pollution; Abatement; Environmental spillover; China;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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