State Ownership and Cost-effectiveness of Environmental Policy: Firm-level Evidence

We employ Chinese firm-level data to examine the interconnections among firm ownership,
environmental regulation, and non-environmental economic policies. We find that there are
substantial differences between state-owned enterprises (SOEs) and privately-owned enterprises
(POEs) in response to government anti-pollution mandates. SOEs reduced emissions more than
POEs, with the former relying mainly on abatement investment and the latter on reducing outputs.
An average POE’s marginal abatement cost is more than nine times that of an average SOE, suggesting significant inefficiencies in policy implementation. Policies liberalizing financial markets could affect POEs’ abatement costs and improve the cost-effectiveness of environmental policies.

Keywords: State-owned enterprises, Financial liberalization, Environmental regulation, Cost-effectiveness

JEL Classification: O13, Q53, Q58

Suggested Citation: Suggested Citation

Fan, Maoyong and Ge, Shunqi and Li, Haoyang and Zhao, Jinhua, State Ownership and Cost-effectiveness of Environmental Policy: Firm-level Evidence (July 21, 2021). Available at SSRN: https://ssrn.com/abstract=3924031 or http://dx.doi.org/10.2139/ssrn.3924031