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Can Technology Solve the Principal-Agent Problem? Evidence from China’s War on Air Pollution

Author

Listed:
  • Michael Greenstone

    (University of Chicago - Department of Economics; NBER)

  • Guojun He

    (The Hong Kong University of Science and Technology)

  • Ruixue Jia

    (University of California San Diego - School of Global Policy and Strategy; CIFAR; NBER)

  • Tong Liu

    (The Hong Kong University of Science and Technology - Division of Social Science)

Abstract

We examine the introduction of automatic air pollution monitoring, which is a central feature of China’s “war on pollution.†Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find that reported PM10 concentrations increased by 35% immediately post–automation and were sustained. City-level variation in underreporting is negatively correlated with income per capita and positively correlated with true pre-automation PM10 concentrations. Further, automation’s introduction increased online searches for face masks and air filters, suggesting that the biased and imperfect pre-automation information imposed welfare costs by leading to suboptimal purchases of protective goods.

Suggested Citation

  • Michael Greenstone & Guojun He & Ruixue Jia & Tong Liu, 2020. "Can Technology Solve the Principal-Agent Problem? Evidence from China’s War on Air Pollution," Working Papers 2020-87, Becker Friedman Institute for Research In Economics.
    • Handle: RePEc:bfi:wpaper:2020-87
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    File URL: https://repec.bfi.uchicago.edu/RePEc/pdfs/BFI_WP_202087.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Sébastien Marchand & Damien Cubizol & Elda Nasho Ah-Pine & Huanxiu Guo, 2023. "Policy change, mass media and air quality in China: new paths to face air pollution?," CERDI Working papers hal-03448375, HAL.
    3. Hanming Fang & Chang Liu & Li-An Zhou, 2020. "Window Dressing in the Public Sector: A Case Study of China’s Compulsory Education Promotion Program," NBER Working Papers 27628, National Bureau of Economic Research, Inc.
    4. Shihe Fu & V. Brian Viard, 2022. "A mayors perspective on tackling air pollution," Chapters, in: Charles K.Y. Leung (ed.), Handbook of Real Estate and Macroeconomics, chapter 16, pages 413-437, Edward Elgar Publishing.
    5. Yingfei Mu & Edward A. Rubin & Eric Zou, 2021. "What’s Missing in Environmental (Self-)Monitoring: Evidence from Strategic Shutdowns of Pollution Monitors," NBER Working Papers 28735, National Bureau of Economic Research, Inc.
    6. Djoumessi, Berenger Tiague, 2022. "Air Pollution, Avoidance Behavior and Labor Supply: Evidence from the United States," SocArXiv czpf4, Center for Open Science.
    7. 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.
    8. Yuan, Huaxi & Zou, Longhui & Feng, Yidai, 2023. "How to achieve emission reduction without hindering economic growth? The role of judicial quality," Ecological Economics, Elsevier, vol. 209(C).
    9. Kong, Dongmin & Liang, Junwei & Liu, Chenhao, 2022. "Invisible enemy: The health impact of ozone," China Economic Review, Elsevier, vol. 72(C).
    10. Li Song & Xiaoliang Zhou, 2021. "Does the Green Industry Policy Reduce Industrial Pollution Emissions?—Evidence from China’s National Eco-Industrial Park," Sustainability, MDPI, vol. 13(11), pages 1-22, June.
    11. Huang, Linyuan & Xie, Rui & Yang, Guohao, 2022. "The impact of lockdown on air pollution: Evidence from an instrument," China Economic Review, Elsevier, vol. 71(C).
    12. Li, Xue & Smyth, Russell & Yao, Yao, 2023. "Extreme temperatures and out-of-pocket medical expenditure: Evidence from China," China Economic Review, Elsevier, vol. 77(C).
    13. Shi, Xinzheng & Zhang, Ming-ang, 2023. "Waste import and air pollution: Evidence from China's waste import ban," Journal of Environmental Economics and Management, Elsevier, vol. 120(C).
    14. Saavedra, S, 2022. "The response of illegal mining to revealing its existence," Documentos de Trabajo 20078, Universidad del Rosario.
    15. Xinming Du, 2023. "Symptom or Culprit? Social Media, Air Pollution, and Violence," CESifo Working Paper Series 10296, CESifo.
    16. Liu, Chenhao & Kong, Dongmin, 2021. "Does political incentive shape governments' disclosure of air pollution information?," China Economic Review, Elsevier, vol. 69(C).

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    Keywords

    Technology; automation; air pollution; China; monitoring and surveillance; moral hazard; data quality;
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