Smoke and Mirrors: Did China's Environmental Crackdowns Lead to Persistent Changes in Polluting Firm Behavior?

Valerie Karplus | Assistant Professor of Global Economics and Management, Massachusetts Institute of Technology

Monday, April 22, 2019 12:15 PM to 1:30 PM


Sharp, short-lived increases in rule enforcement are common in hierarchical organizations facing multiple objectives. Using data from China that links quasi-random variation in the intensity of environmental policing to high-frequency air pollution data, we show that crackdowns in over short (one-month) periods result in a sharp (approximately 30%) reduction in sulfur dioxide pollution around coal power plants. Pollution reverts to prior levels after crackdowns end. The pace of reversion is faster for firms that outrank the city government, suggesting that hierarchical ties to China’s central authorities attenuate a firm’s accountability to the local environmental protection bureau. Engaging citizen informants deters a subset of egregious polluters during crackdowns, but has no lasting effect, especially among outranking firms. Our results document empirically the limits of a highly centralized approach to improving environmental governance through short-lived enforcement crackdowns.