Air pollution, economic spillovers, and urban growth in China

This paper empirically tests the interactive effects of air pollution and economic spillovers in Chinese cities from 2003 to 2010. The results show that Chinese cities benefit from the economic spillovers from surrounding cities, but bear the costs of negative air pollution externalities created by neighboring cities. We use wind direction and the administrative boundaries of provinces to disentangle possible multicollinearity between air pollution emissions and economic spillovers across cities. However, the results could not reject the growth-restricting effects of air pollution from neighboring cities. The results imply that the development of a city surrounded by polluters is likely to be constrained.