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Strategic Interaction in Spending on Environmental Protection: Spatial Evidence from Chinese Cities
Author(s) -
Deng Huihui,
Zheng Xinye,
Huang Nan,
Li Fanghua
Publication year - 2012
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2012.01304.x
Subject(s) - china , government (linguistics) , business , strategic interaction , local government , spatial econometrics , economics , public economics , natural resource economics , political science , public administration , microeconomics , philosophy , linguistics , law , econometrics
Abstract In China, the responsibility of protecting the environment lies largely with local governments. Within the framework of spatial econometrics, we investigate empirically the consequence of such an institutional setting. Using city‐level data for China, the present study finds that city governments behave strategically in making spending decisions regarding environmental protection. This paper finds that a city government appears to cut its own spending as a response to the rise in environmental protection spending by its neighbors. Hence, environmental protection tends to be underprovided. As a result, we suggest that centralizing the environmental protection responsibility to a higher level of government would be beneficial in terms of controlling pollution in China.