Political Connections and Industrial Pollution: Evidence Based on State Ownership and Environmental Levies in China
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We investigate how state involvement in the ownership of non-listed entrepreneurial firms affects pollution fees levied by national and provincial governments in China (environmental levies). While the national government sets minimum environmental standards, provincial governments can enact requirements that exceed these minimums, and they are largely responsible for enforcing even the national standards, so environmental levies can measure concessions that provinces make to encourage development and employment. Furthermore, state ownership is a good proxy for a firm’s political connections, which can influence the relationship between the firm and the environmental authorities. We find that firms with state ownership pay lower environmental levies, which indicates that concessions are made for political or economic purposes. However, these concessions are conditional on the level of development of the province offering them, with better developed provinces providing fewer concessions.
KeywordsPolitical connections Industrial pollution State ownership Environmental levies
Gross domestic product
Chief executive officer
Chinese non-listed enterprise database
This study was partially supported by Natural Science Foundation of China #71272143 for Tang, and it was done when Tang was a visiting scholar at the University of Manitoba, Canada.
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