Intergovernmental competition, industrial spatial distribution, and air quality in China

Area of Science:

• Environmental Science
• Public Policy
• Economics

Background:

• Local governments are crucial for environmental protection as clean air is a public good.
• Intergovernmental competition is a significant factor influencing environmental outcomes.
• Understanding the mechanisms of this competition is vital for effective environmental policy.

Purpose of the Study:

• To investigate the impact of intergovernmental competition on air quality in China.
• To differentiate the effects of tax competition versus infrastructure investment competition.
• To analyze the spatial dimensions and transmission channels of pollution.

Main Methods:

• Spatial Durbin model application to assess spatial impacts.
• Analysis of intergovernmental tax competition and infrastructure investment competition.
• Examination of industrial spatial distribution and agglomeration economies.

Main Results:

• Intergovernmental tax competition significantly increases sulfur dioxide and haze emissions, degrading air quality.
• Competition in infrastructure investment does not yield similar negative air quality effects.
• Tax competition influences air quality via industrial structure changes and agglomeration, causing pollution spillover and transfer.

Conclusions:

• Intergovernmental tax competition negatively impacts regional air quality through industrial relocation and a "race to the bottom" effect.
• Pollution spillover and transfer are key spatial mechanisms through which intergovernmental competition affects air quality.
• Fiscal decentralization and environmental regulations may play regulatory roles in mitigating these effects.