"Local favoritism and environmental regulation"

Abstract :
This paper examines the impact of local favoritism on pollution regulation. We collect georeferenced data for polluting firms and spatially match them to prefectural city boundaries and river networks in the Yangtze River basin in China. By exploiting the variation in hometown links across bordering areas within the same jurisdiction caused by exogenous prefectural city leader turnover, we find that large firms in areas upstream of local leaders’ hometowns experience a significantly larger decline in COD emission intensity compared to those in similar areas upstream of non-hometown regions. However, there is no such impact for small firms. Additionally, we find that firms in regions with local leaders over 55 years old experience a significantly larger decline in wastewater emission intensity compared to those in similar areas upstream of non-hometown regions, while no such impact is observed for firms in regions with local leaders below 55 years old.