IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v53y2019icp271-289.html
   My bibliography  Save this article

Has China's war on pollution slowed the growth of its manufacturing and by how much? Evidence from the Clean Air Action

Author

Listed:
  • Li, Xiao
  • Qiao, Yuanbo
  • Shi, Lei

Abstract

We provide the first causal estimate of the aggregate effect of the 2013–2017 Clean Air Action, one of the largest and most recent environmental programs in China, on the growth of the manufacturing industry. Using a quasi-experimental approach, we find that the Clean Air Action significantly reduced the manufacturing output in the Beijing-Tianjin-Hebei region, which was subject to the most stringent air pollution regulation, by 6.7% during its first two years of implementation. The losses add up to 408.7 billion yuan (2013 price level), equal to 6.5% of the regional GDP in 2013. The action slowed the growth of manufacturing in Hebei and Tianjin by 9.6% and 5.9%, respectively. We find no evidence that it caused a significant reduction of manufacturing output in Beijing. The heterogeneous treatment effects can be explained by the difference in industrial structure between Beijing, Tianjin, and Hebei. Our analysis empirically suggests that the Clean Air Action helped drive the structural change of the Chinese economy by substantially suppressing “dirty” manufacturing sectors.

Suggested Citation

  • Li, Xiao & Qiao, Yuanbo & Shi, Lei, 2019. "Has China's war on pollution slowed the growth of its manufacturing and by how much? Evidence from the Clean Air Action," China Economic Review, Elsevier, vol. 53(C), pages 271-289.
    • Handle: RePEc:eee:chieco:v:53:y:2019:i:c:p:271-289
    DOI: 10.1016/j.chieco.2018.08.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X18301159
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2018.08.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vincenzo BoveBy & Leandro Elia & Ron P Smith, 2017. "On the heterogeneous consequences of civil war," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 550-568.
    2. Domenico Giannone & Lucrezia Reichlin & Luca Sala, 2005. "Monetary Policy in Real Time," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 161-224, National Bureau of Economic Research, Inc.
    3. Laurent Gobillon & Thierry Magnac, 2016. "Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls," The Review of Economics and Statistics, MIT Press, vol. 98(3), pages 535-551, July.
    4. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April.
    5. Jushan Bai & Serena Ng, 2002. "Determining the Number of Factors in Approximate Factor Models," Econometrica, Econometric Society, vol. 70(1), pages 191-221, January.
    6. Berman, Eli & Bui, Linda T. M., 2001. "Environmental regulation and labor demand: evidence from the South Coast Air Basin," Journal of Public Economics, Elsevier, vol. 79(2), pages 265-295, February.
    7. W. Reed Walker, 2013. "The Transitional Costs of Sectoral Reallocation: Evidence From the Clean Air Act and the Workforce," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1787-1835.
    8. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August.
    9. Morgenstern, Richard D. & Pizer, William A. & Shih, Jhih-Shyang, 2002. "Jobs Versus the Environment: An Industry-Level Perspective," Journal of Environmental Economics and Management, Elsevier, vol. 43(3), pages 412-436, May.
    10. Adam B. Jaffe et al., 1995. "Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 132-163, March.
    11. Lin Zhang & Zaichao Du & Cheng Hsiao & Hua Yin, 2015. "The Macroeconomic Effects of the Canada–US Free Trade Agreement on Canada: A Counterfactual Analysis," The World Economy, Wiley Blackwell, vol. 38(5), pages 878-892, May.
    12. Tom Y. Chang & Joshua Graff Zivin & Tal Gross & Matthew Neidell, 2019. "The Effect of Pollution on Worker Productivity: Evidence from Call Center Workers in China," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 151-172, January.
    13. Scott Cunningham & Manisha Shah, 2018. "Decriminalizing Indoor Prostitution: Implications for Sexual Violence and Public Health," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(3), pages 1683-1715.
    14. Ouyang, Min & Peng, Yulei, 2015. "The treatment-effect estimation: A case study of the 2008 economic stimulus package of China," Journal of Econometrics, Elsevier, vol. 188(2), pages 545-557.
    15. Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1403-1448.
    16. Alexei Onatski, 2009. "Testing Hypotheses About the Number of Factors in Large Factor Models," Econometrica, Econometric Society, vol. 77(5), pages 1447-1479, September.
    17. Cheng Hsiao & H. Steve Ching & Shui Ki Wan, 2012. "A Panel Data Approach For Program Evaluation: Measuring The Benefits Of Political And Economic Integration Of Hong Kong With Mainland China," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(5), pages 705-740, August.
    18. W. Reed Walker, 2011. "Environmental Regulation and Labor Reallocation: Evidence from the Clean Air Act," American Economic Review, American Economic Association, vol. 101(3), pages 442-447, May.
    19. Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1175-1219, December.
    20. Bai, ChongEn & Li, Qi & Ouyang, Min, 2014. "Property taxes and home prices: A tale of two cities," Journal of Econometrics, Elsevier, vol. 180(1), pages 1-15.
    21. Michael Greenstone & John A. List & Chad Syverson, 2011. "The Effects of Environmental Regulation on the Competiveness of U.S. Manufacturing," Working Papers 11-03, Center for Economic Studies, U.S. Census Bureau.
    22. Lin, Faqin, 2017. "Trade openness and air pollution: City-level empirical evidence from China," China Economic Review, Elsevier, vol. 45(C), pages 78-88.
    23. Chen, Su-Mei & He, Ling-Yun, 2014. "Welfare loss of China's air pollution: How to make personal vehicle transportation policy," China Economic Review, Elsevier, vol. 31(C), pages 106-118.
    24. He, Guojun & Fan, Maoyong & Zhou, Maigeng, 2016. "The effect of air pollution on mortality in China: Evidence from the 2008 Beijing Olympic Games," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 18-39.
    25. Ke, Xiao & Chen, Haiqiang & Hong, Yongmiao & Hsiao, Cheng, 2017. "Do China's high-speed-rail projects promote local economy?—New evidence from a panel data approach," China Economic Review, Elsevier, vol. 44(C), pages 203-226.
    26. Du, Zaichao & Zhang, Lin, 2015. "Home-purchase restriction, property tax and housing price in China: A counterfactual analysis," Journal of Econometrics, Elsevier, vol. 188(2), pages 558-568.
    27. Siqi Zheng & Matthew E. Kahn, 2013. "Understanding China's Urban Pollution Dynamics," Journal of Economic Literature, American Economic Association, vol. 51(3), pages 731-772, September.
    28. Matthew E. Kahn & Pei Li & Daxuan Zhao, 2015. "Water Pollution Progress at Borders: The Role of Changes in China's Political Promotion Incentives," American Economic Journal: Economic Policy, American Economic Association, vol. 7(4), pages 223-242, November.
    29. Fujiki, Hiroshi & Hsiao, Cheng, 2015. "Disentangling the effects of multiple treatments—Measuring the net economic impact of the 1995 great Hanshin-Awaji earthquake," Journal of Econometrics, Elsevier, vol. 186(1), pages 66-73.
    30. Thomas J. Sargent & Christopher A. Sims, 1977. "Business cycle modeling without pretending to have too much a priori economic theory," Working Papers 55, Federal Reserve Bank of Minneapolis.
    31. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    32. Michael E. Porter & Claas van der Linde, 1995. "Toward a New Conception of the Environment-Competitiveness Relationship," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 97-118, Fall.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wang, Huanhuan & Xiong, Jiaxin, 2022. "Governance on water pollution: Evidence from a new river regulatory system of China," Economic Modelling, Elsevier, vol. 113(C).
    2. Zhihua Tian & Yanfang Tian & Yang Chen & Shuai Shao, 2020. "The economic consequences of environmental regulation in China: From a perspective of the environmental protection admonishing talk policy," Business Strategy and the Environment, Wiley Blackwell, vol. 29(4), pages 1723-1733, May.
    3. Ren Wang & Yuxiang Bian & Han Gao & Jie Hou, 2023. "Optimal Environmental Policy for Heterogeneous Governments in China," IJERPH, MDPI, vol. 20(4), pages 1-12, February.
    4. Kuang, Yunming & Lin, Boqiang, 2022. "Natural gas resource utilization, environmental policy and green economic development: Empirical evidence from China," Resources Policy, Elsevier, vol. 79(C).
    5. Shulin Wang & Yongtao Li & Mahfuzul Haque, 2019. "Evidence on the Impact of Winter Heating Policy on Air Pollution and Its Dynamic Changes in North China," Sustainability, MDPI, vol. 11(10), pages 1-15, May.
    6. Shuai Chen & Chen Ji & Songqing Jin, 2022. "Costs of an environmental regulation in livestock farming: Evidence from pig production in rural China," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 541-563, June.
    7. Li, Jing & Shi, Xing & Wu, Huaqing & Liu, Liwen, 2020. "Trade-off between economic development and environmental governance in China: An analysis based on the effect of river chief system," China Economic Review, Elsevier, vol. 60(C).
    8. Yongliang Yang & Jing Fang & Wen Wang & Yan Li & Yi Li, 2021. "The Impact of Air Quality on Effective Labor Supply: Based on the Survey Data of Zhejiang Province in China," Sustainability, MDPI, vol. 13(7), pages 1-22, April.
    9. Wang, Yuze & Eriksson, Tor & Luo, Nengsheng, 2023. "The health impacts of two policies regulating SO2 air pollution: Evidence from China," China Economic Review, Elsevier, vol. 78(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Huang, Bihong & Punzi, Maria Teresa & Wu, Yu, 2021. "Do banks price environmental transition risks? Evidence from a quasi-natural experiment in China," Journal of Corporate Finance, Elsevier, vol. 69(C).
    2. Guan, Jin & He, Dongwei & Zhu, Qigui, 2022. "More incentive, less pollution: The influence of official appraisal system reform on environmental enforcement," Resource and Energy Economics, Elsevier, vol. 67(C).
    3. Ke, Xiao & Chen, Haiqiang & Hong, Yongmiao & Hsiao, Cheng, 2017. "Do China's high-speed-rail projects promote local economy?—New evidence from a panel data approach," China Economic Review, Elsevier, vol. 44(C), pages 203-226.
    4. Shiyu Bo, 2021. "Environmental Regulations, Political Incentives and Local Economic Activities: Evidence from China," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 812-835, June.
    5. Carvalho, Carlos & Masini, Ricardo & Medeiros, Marcelo C., 2018. "ArCo: An artificial counterfactual approach for high-dimensional panel time-series data," Journal of Econometrics, Elsevier, vol. 207(2), pages 352-380.
    6. Consoli, Davide & Marin, Giovanni & Marzucchi, Alberto & Vona, Francesco, 2016. "Do green jobs differ from non-green jobs in terms of skills and human capital?," Research Policy, Elsevier, vol. 45(5), pages 1046-1060.
    7. Olivier Deschenes, 2018. "Environmental regulations and labor markets," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-22, November.
    8. Marin, Giovanni & Vona, Francesco, 2021. "The impact of energy prices on socioeconomic and environmental performance: Evidence from French manufacturing establishments, 1997–2015," European Economic Review, Elsevier, vol. 135(C).
    9. Zhu, Junming & Ruth, Matthias, 2015. "Relocation or reallocation: Impacts of differentiated energy saving regulation on manufacturing industries in China," Ecological Economics, Elsevier, vol. 110(C), pages 119-133.
    10. Zhang, Yijun & Song, Yi, 2022. "Tax rebates, technological innovation and sustainable development: Evidence from Chinese micro-level data," Technological Forecasting and Social Change, Elsevier, vol. 176(C).
    11. Chen, Ying, 2023. "Environmental regulation, local labor market, and skill heterogeneity," Regional Science and Urban Economics, Elsevier, vol. 101(C).
    12. Han, Chao & Tian, Xian-Liang, 2022. "Less pollution under a more centralized environmental system: Evidence from vertical environmental reforms in China," Energy Economics, Elsevier, vol. 112(C).
    13. Lei Wen & Hongbing Li & Xueying Bian, 2024. "Local environmental legislation and employment growth: evidence from Chinese manufacturing firms," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(7), pages 16917-16955, July.
    14. Dang, Tri Vi & Wang, Youan & Wang, Zigan, 2022. "The role of financial constraints in firm investment under pollution abatement regulation," Journal of Corporate Finance, Elsevier, vol. 76(C).
    15. Zhang, Linling & Long, Ruyin & Chen, Hong, 2019. "Do car restriction policies effectively promote the development of public transport?," World Development, Elsevier, vol. 119(C), pages 100-110.
    16. Marin, Giovanni & Vona, Francesco, 2019. "Climate policies and skill-biased employment dynamics: Evidence from EU countries," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    17. Mengdi Liu & Bing Zhang & Qiang Geng, 2018. "Corporate pollution control strategies and labor demand: evidence from China’s manufacturing sector," Journal of Regulatory Economics, Springer, vol. 53(3), pages 298-326, June.
    18. Si, Shuyang & Lyu, Mingjie & Lin Lawell, C.-Y. Cynthia & Chen, Song, 2021. "The effects of environmental policies in China on GDP, output, and profits," Energy Economics, Elsevier, vol. 94(C).
    19. repec:spo:wpmain:info:hdl:2441/1jrfjrj6fp8t6q12fv5lra520c is not listed on IDEAS
    20. Hongjun Li & Zheng Li & Cheng Hsiao, 2023. "Assessing the impacts of pandemic and the increase in minimum down payment rate on Shanghai housing prices," Empirical Economics, Springer, vol. 64(6), pages 2661-2682, June.
    21. Carlos Viana de Carvalho & Ricardo Masini & Marcelo Cunha Medeiros, 2016. "The perils of Counterfactual Analysis with Integrated Processes," Textos para discussão 654, Department of Economics PUC-Rio (Brazil).

    More about this item

    Keywords

    Air pollution; Environmental regulation; Economic cost; Quasi-experiment; Porter Hypothesis;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:53:y:2019:i:c:p:271-289. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.