NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Consequences of Spatially Differentiated Water Pollution Regulation in China

Zhao Chen, Matthew E. Kahn, Yu Liu, Zhi Wang

NBER Working Paper No. 22507
Issued in August 2016
NBER Program(s):EEE, PE

China’s environmental regulators have sought to reduce the Yangtze River’s water pollution. We document that this regulatory effort has had two unintended consequences. First, the regulation’s spatial differential stringency has displaced economic activity upstream. As polluting activity agglomerates upstream, more Pigouvian damage is caused downstream. Second, the regulation has focused on reducing one dimension of water pollution called chemical oxygen demand (COD). Thus, local officials face weak incentives to engage in costly effort to reduce other non-targeted but more harmful water pollutants such as petroleum, lead, mercury, and phenol.

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Document Object Identifier (DOI): 10.3386/w22507

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