Pollution Control Effort at China's River Borders: When Does Free Riding Cease?
At political boundaries, local leaders often have weak incentives to reduce polluting activity because the social costs are borne by downstream neighbors. This paper exploits a natural experiment set in China in which the central government changed the local political promotion criteria and hence incentivized local officials to reduce border pollution along specific criteria. Using a difference in difference approach, we document evidence of pollution progress with respect to targeted criteria at river boundaries. Other indicators of water quality, not targeted by the central government, do not improve after the regime shift. Using data on the economic geography of key industrial water polluters, we explore possible mechanisms.
We thank the UCLA Ziman Center for Real Estate for providing generous support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Water Pollution Progress at Borders: The Role of Changes in China's Political Promotion Incentives Matthew E. Kahn Pei Li Daxuan Zhao AMERICAN ECONOMIC JOURNAL: ECONOMIC POLICY VOL. 7, NO. 4, NOVEMBER 2015 (pp. 223-42