The political economy of ratchet effect: Evidence from China’s environmental regulation
Guangyu Cao,
Xi Weng,
Mingwei Xu and
Li-An Zhou
Journal of Environmental Economics and Management, 2025, vol. 131, issue C
Abstract:
The ratchet effect is a critical component in dynamic incentive designs. This paper exploits China’s recent adoption of minimum performance standards in air pollution controls and variations in the frequency of target assignment, and utilizes Regression Discontinuity Design to estimate the impact of target ratcheting on Chinese local officials’ incentives to reduce air pollution. We find strong evidence that (i) when local officials fail the minimum targets and try to make up for the failure to avoid severe punishment, the prospect of being ratcheted would weaken the make-up efforts, and (ii) air quality will significantly deteriorate after local officials fulfill the minimum targets ahead of schedule, regardless of whether local officials face the prospect of target ratcheting. We further discover that job rotation and the existence of comparable peers could effectively mitigate the ratchet effect.
Keywords: Ratchet effect; Environmental regulation; Minimum performance standard; Obligatory target (search for similar items in EconPapers)
JEL-codes: H70 P21 P26 Q53 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095069625000348
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:131:y:2025:i:c:s0095069625000348
DOI: 10.1016/j.jeem.2025.103150
Access Statistics for this article
Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates
More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().