Industrial Environmental Performance in China: The Impact of Inspections

Abstract

Inspections have a statistically significant impact on firms' environmental performance in the Chinese city of Zhenjiang, and citizens' complaints have a significant impact on inspections. So stronger information and education campaigns may improve social welfare in the city. Little empirical research has been done on monitoring and enforcement issues in environmental economics, especially to analyze the impact of monitoring and enforcement on polluters' environmental performance. No studies have been done in developing economies.

Dasgupta, Laplante, Mamingi, and Wang explore the impact of inspections, and the potential impact of pollution charges and citizens' complaints, on the environmental performance of polluters in China. Their analysis of plant-level data from the city of Zhenjiang shows that:

Inspections have a statistically significant impact on firms' environmental performance.

Pollution charges do not have a statistically significant effect on firms' performance - although the lack of variation in pollution charges in Zhenjiang precludes effectively capturing their impact.

Complaints have a significant impact on inspections and therefore on pollution control.

Currently available data do not allow analysis of whether the cost of additional inspections is justified, but it is reasonable to speculate that additional inspections would improve social welfare in Zhenjiang and that information and education campaigns are probably a good way to encourage citizen complaints.

This paper - a product of Infrastructure and Environment, Development Research Group - is part of a larger effort in the group to study environmental regulation in developing countries. The study was funded by the Bank's Research Support Budget under the research project Pollution Control in China: The Role and Impact of Inspection and Complaints (RPO 682-44).