New evidence on the soft budget constraint: Chinese environmental policy effectiveness in SOE-dominated cities * - Archive ouverte HAL Access content directly
Journal Articles Public Choice Year : 2021

New evidence on the soft budget constraint: Chinese environmental policy effectiveness in SOE-dominated cities *

Abstract

This paper analyses the efficiency of a set of environmental measures introduced by the 11th Five Years Plan (FYP) in China in 2006, using a rich and unique dataset borrowed from the Ministry of Environmental Protection (MEP) and the State Environmental Protection Agency (SEPA). By exploiting plausibly exogenous variation in regulatory stringency generated by the targets' system in China across provinces in 2006, we find evidence that pollution-intensive cities substantially decreased the emission of SO2, whereas cities where the presence of SOEs (State Owned Enterprises) is large did not. We interpret these results as pointing to the evidence of a still ongoing SBC (Soft Budget Constraints) surrounding Chinese SOEs. The findings are robust to the inclusion of different specifications of fixed effects, and other key determinants of firm pollution. Moreover, we investigate what are the main factors behind the no-compliance to the regulations: the overlapping (or not) with TCZ (SPZ, Coastal) cities where the environmental (growth) policies are prioritized, * The authors are grateful to William F. Shughart II and two anonymous reviewers, whose comments improved the manuscript considerably. We are also very greatful to Zhao Ruili and Zhou Ling for their precious help in collecting the data from the China Environment Statistics Yearbook.
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Dates and versions

hal-03511874 , version 1 (05-01-2022)

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Mathilde Maurel, Thomas Pernet. New evidence on the soft budget constraint: Chinese environmental policy effectiveness in SOE-dominated cities *. Public Choice, 2021, 187 (1-2), pp.111-142. ⟨10.1007/s11127-020-00834-1⟩. ⟨hal-03511874⟩
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