The impact of government-enterprise collusion on environmental pollution in China

Pollution emissions in China are associated with the relationship between local governments and enterprises, especially in those cities with government-enterprise collusion (GEC). We evaluate the causal relationships between GEC and SO₂ emissions at the enterprise level, by adopting the Propensity Score Matching-Difference in Difference method from a comprehensive environmental database. The empirical results show that, compared with those in the cities without collusion, SO₂ emissions of enterprises in the colluded cities increase by 11.3% (95% Confidence Interval (CI): 0.041-0.186). These GEC effects are more substantial in the cities whose regional officials work with longer terms, in the foreign-owned or small-scale enterprises, and the labour-intensive industries. The findings suggest the existing environment and personnel management policies in China should be adjusted for more sustainable development.