Incentivizing Environmental Public Goods: Evidence from Urban Greening in China

Abstract

China's rapid surge in urban greening in recent years presents a puzzling deviation from global patterns. We document three stylized facts. Urban greening was stable from 2001 to 2013 but expanded rapidly afterward, coinciding with China's air pollution control efforts. More polluted cities experienced faster greening growth, and greening disproportionately occurred near air quality monitoring stations. These patterns suggest that urban greening partly reflects a strategic response by local governments to air pollution control mandates. The economic benefits of urban greening amount to approximately 1.13 trillion CNY per year, exceeding program costs. Our results suggest that top-down air pollution control reshaped local government incentives, improving the provision of environmental public goods and social welfare.

Keywords: Public Goods, Air Pollution, Environmental Regulation, Strategic Behavior JEL Codes: O13, Q53, Q57, R11, R52