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China¡¯S Paper Industry: Growth And Environmental Policy During Economic Reform


  • Jintao Xu

    () (Center for Chinese Agricultural Policy Beijing, Chinese Academy of Sciences)

  • William F. Hyde

    () (Environmental Economics Unit, Goteborg University)

  • Gregory S. Amacher

    (Department of Forestry, Virginia Tech.)


This paper examines the pollution control policies applied in China¡¯s paper industry during the period of economic reform from 1982 to 1992. The paper industry is the source of ten percent of China¡¯s industrial wastewater emissions and one-fourth of its chemical oxygen demand. It is the largest source of rural environmental pollution. The very small size of China¡¯s mills is comparable to that of papermills in many developing countries and this small size itself creates an interesting problem. Modern pollution control technologies were created for much larger and more capital intensive facilities like those in North American and Northern Europe. Therefore, adoption of the best technology is not a simple matter of technology transfer. We used mill-level production and pollution data to estimate (1) the effect of China¡¯s system of pollution control levies on three environmental effluents, and then (2) examined further the effect of this system of levies on the technical efficiency of mill-level production. Our results show that the pollution levies worked for those larger establishments that were the main targets of reform policies in this period. They decreased the production of effluents by causing managers to alter their mix of productive inputs, but the levies were not large enough to induce the purchase of modern pollution control technologies. The levies had an efficiency improving effect on most modern mills and also on those mills that subsequently discontinued operation. Nevertheless, we observed opportunity for further improvements in efficiency, notably through increased labor productivity. This is consistent with the government¡¯s recent decision to relax its policy of employment protection for workers in state-owned mills. Although we found no evidence of scale economies in production, we did observe that smaller mills were less efficient. This observation is consistent with the government¡¯s more recent decision to close the most environmentally offending small mills.

Suggested Citation

  • Jintao Xu & William F. Hyde & Gregory S. Amacher, 2003. "China¡¯S Paper Industry: Growth And Environmental Policy During Economic Reform," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 28(1), pages 49-79, June.
  • Handle: RePEc:jed:journl:v:28:y:2003:i:1:p:49-79

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    References listed on IDEAS

    1. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
    2. Kumbhakar, Subal C., 1990. "Production frontiers, panel data, and time-varying technical inefficiency," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 201-211.
    3. Deily, Mary E. & Gray, Wayne B., 1991. "Enforcement of pollution regulations in a declining industry," Journal of Environmental Economics and Management, Elsevier, vol. 21(3), pages 260-274, November.
    4. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
    5. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
    6. Jefferson, Gary H., 1990. "China's iron and steel industry : Sources of enterprise efficiency and the impact of reform," Journal of Development Economics, Elsevier, vol. 33(2), pages 329-355, October.
    7. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
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    More about this item


    Pollution Taxes; Effluents; China; Economic Growth; Production Frontiers;

    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation


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