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Do new mayors bring fresh air? Some evidence of regulatory capture in China

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Abstract

This paper provides evidence of regulatory capture in China’s environmental regulation by exploring the relationship between subnational leaders’ tenure and local firms’ environmental protection behaviors. We find that firms discharge more exhaust and make less effort to abate air pollution when mayors’ tenure increases. The results are robust to alternative specifications and measures, but show heterogeneity across regions and ownerships. The intensity of regulatory capture depends on institutional factors and firm characteristics. This study enriches the literature by analyzing regulatory capture under a regionally decentralized authoritarian system and provides clear policy implications for preventing regulatory capture.

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Notes

  1. There is another reason why we use tenure rather than native. To increase the transaction costs of collusion and corruption, officials are seldom appointed by upper-level governments as the core leaders of their hometown. So only a small number of leaders are native of the cities they serve.

  2. Industrial sector includes mining industry, manufacture, and public utilities (production and supply of electric power, gas and water). In the National Industries Classification System (both GB/T 4754-94 and GB/T 4754-2002), industrial sector consists of two-digit industry ranging from 6 to 46. See Holz (2013) for detail of Chinese industrial classification systems.

  3. See, for example, Brandt et al. (2012), for more information on the Annual Survey of Industrial Firms.

  4. Xinhua.net is the official website of the Xinhua News Agency, the national news agency of China; people.cn is the website of People’s Daily, the official media of China. The governments release information on appointment and removal of officials through these two medias and provide curriculum vitae of officials as well.

  5. Although we have longer time series for the Environmental Protection Database and the data of local leaders, the Annual Survey of Industrial Firms (ASIF) is only available from 1998–2013.

  6. The industrial waste gas, or exhaust for short, is the most important source of air pollution. For example, the particulate waste gas is the direct source of PM10, PM2.5, and other kinds of air pollution; and the gaseous waste gas, especially those nitrogenous or sulfureted exhaust, results not only in air pollution, but also land and water pollution as well (Sher 1998).

  7. We are indebted to one of the reviewers for this idea.

  8. We thank one of the reviewers for pointing this possibility out.

  9. Notice that coefficient in Column (4) is not statistically significant, but its counterpart in Column (1) is not significant either. Both Column (5) and Column (8) are significant, implying that the potential endogeneity is not severe enough to change our basic conclusion.

  10. Among the 156 firms in our sample, 102 firms are in eastern China and the rest are in central and western China.

  11. 102 of the 156 sample firms are SOEs, and the rest are non-SOEs.

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Funding

The funding was provided by Science and Technology Planning Project of Guangdong Province (Grand No. 2019A101002016). The Key Project of National Social Science Fund (19AZD012).

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Authors and Affiliations

  1. College of Economics and Management, China Agricultural University, Beijing, China

    Hongqi Ma

  2. Lingnan College, Sun Yat-Sen University, Guangzhou, China

    Guangjun Shen

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  1. Hongqi Ma
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  2. Guangjun Shen
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Correspondence to Guangjun Shen.

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Ma, H., Shen, G. Do new mayors bring fresh air? Some evidence of regulatory capture in China. Rev Econ Design 25, 227–249 (2021). https://doi.org/10.1007/s10058-021-00248-5

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