Abstract

Local environmental policy innovation can provide important experiments and cases for enriching national environmental policy toolbox. However, under the dual pressures of economic development and environmental governance, an innovative local environmental policy may have differentiated policy effects in regions. Therefore, in order to effectively promote the local environmental policy innovation, it is necessary to empirically evaluate the following three issues: reproducibility of environmental policy effects, differented policy features among diffusion models, and variation in regulated entities under each model. To address the above issues, this paper utilizes a special case: different diffusion models of the China's River Chief Policy (RCP). Applying firm-level pollution and economic data, this paper uses the Difference-in-difference (DID) approach to identify policy effects. The main results are as follows. (1) During the policy diffusion process, the policy effect of RCP was successfully replicated under the bottom -up diffusion path, which is led by the higher government; while insignificant in the parallel diffusion regions, where the policy was actively imitated by other local governments. (2) In the initiated region and the bottom-up diffusion regions, RCP reduced COD emissions mainly through sacrificing the output of firms, rather than enhancing their waste water treatment capacities. However, in the parallel diffusion regions, RCP could neither reduce the firms' output, nor cut the COD emissions. (3) RCP in the parallel diffusion regions showed heterogenous effects among regulated entities. It had effectively reduced COD emissions among large firms but exerted relatively weaker regulation on emissions-intensive sectors. It also increased outputs in sectors with intensive emissions to compensate the economic loss from other entities.

Citation

Wang, B. Mo, Q. and Qian, H. (2020). The Diffusion Models and Effects of the Local Environmental Policy Innovation: A Micro-econometric Evidence from the Diffusion of River Chief Policy. China Industrial Economics, 8, 99-117.