Order! the border: Multitasking, air pollution regulation and local government responses

Abstract

This paper presents new evidence on how multitasking local governments' strategic responses to top-down environmental regulations can induce pollution in border areas. Using the implementation of the Air Pollution Prevention and Control Action Plan in China as a quasi-experiment, we exploit a difference-in-differences model and find that this policy induces the border effect of air pollution. We further reveal a salient window dressing behavior of local governments, which air pollution in border counties reduces significantly as the high-stakes inspection time neared, followed by a dramatic increase soon after the inspection. These results are driven by local government responses to incomprehensive air quality monitor stations installed in non-border counties, and local officials with strong promotion incentives, who exert strict regulations in non-border counties while varied regulations in border counties over time to cater for the multitasking of economic growth and air quality targets.