Does local government competition affect the dependence on polluting industries? Evidence from China's land market.

ABSTRACT

Many countries have formulated strict environmental regulation policies, but unfortunately, environmental pollution is still severe. We believe that this phenomenon may result from institutional factors. We study whether local government competition affects the dependence on polluting industries and test it with the transaction data of China's land market. We find that the decline in the economic ranking of cities increases the scale of land transferred to polluting industries, and the more the ranking decline, the larger the scale of land in polluting industries. Besides, we analyze the impact of the first decline in the urban economic ranking, finding that the land transfer scale of polluting industries exhibits a trend of slowing down after a rapid rise in the short term. Heterogeneity analysis shows that officials with lower education levels and before-retirement age will dependent more on polluting industries to a greater extent when they face local government competition, and cities with economic growth lower than the national average will increase their dependence on polluting industries to a greater extent. This paper provides new insights into the causes of the environmental governance dilemma, which also highlights the need to weaken economic indicators and strengthen environmental indicators in government performance assessment.