“Westward movement of new polluting firms in China: Pollution reduction mandates and location choice”

“Westward movement of new polluting firms in China: Pollution reduction mandates and location choice”

Haoyi Wu, Huanxiu Guo, Bing Zhang and Maoliang Bu

In: Journal of Comparative Economics, Vol. 45, No. 1, 119-138

In their paper Wu et al. question the efficiency of the environmental policy in China by providing a systematic study of new polluters’ location due to the 11th Five-Year-Plan (2006-2010) pollution reduction mandate. They investigate a self-enforcing process. On the one hand, to maximize their profits, polluting firms could migrate to the western provinces where mandates are less stringent. That would raise concerns about pollution transfer instead of pollution reduction. On the other hand western provinces with low mandates generally have weak institutional capacity and low levels of environmental management. That could give polluting firms an additional incentive to emit more pollution in these provinces. To investigate these questions they use a conditional logit model.