Trans-boundary Air Pollution and Industrial Relocation in China

[摘要] This dissertation studies trans-boundary air pollution under China's regionally decentralized environmental management and its influences on non-polluting industries. It consists of three chapters.In the first chapter, I study whether subnational governments in China have engaged in trans-boundary air pollution. I identify which cities are downwind in each of China's provinces and uses difference-in-differences estimations based on wind patterns and a large-scale policy-change. I find that China's provincial governments began locating highly polluting industries in downwind cities near provincial borders after 2003 when the central government introduced stricter environmental policies. These results partly explain why environmental pollution has not been mitigated in certain parts of China.In the second chapter, I build a model to analyze the effects of policy-induced trans-boundary air pollution on non-polluting industries in China. The patterns of industrial relocation caused by trans-boundary air pollution are characterized in the model. When the central government increases the weight of pollution in its evaluation function, there are more output and employment of polluting industry in the downwind city in each province, which implies more trans-boundary air pollution. This will lead to relatively less output and employment of non-polluting industry in the upwind city, and total welfare of the economy is less than the social planner's solution.In the third chapter, I empirically estimate the negative externalities of trans-boundary air pollution on non-polluting industries in China. Through a quasi-experimental approach combining regional wind patterns and a large-scale policy-change in the early 2000s, I find that output and employment of existing firms in non-polluting industries are relatively less in cities receiving trans-boundary air pollution from their upwind adjacent provinces. The negative effects are relatively greater for firms of non-polluting industries in cities with higher average wind speed. New firms of non-polluting industries are less likely to be located in cities receiving more trans-boundary air pollution after the policy change.

[发布机构] the University of Pittsburgh