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The real effect of legal institutions: Environmental courts and firm environmental protection expenditure

Qi Zhang, Zhi Yu and Dongmin Kong

Journal of Environmental Economics and Management, 2019, vol. 98, issue C

Abstract: This paper evaluates the real effects of environmental justice reform on environmental governance at the firm level. Using the establishment of environmental courts in China as a quasi-natural experiment, our difference-in-differences estimation shows that: (1) environmental courts significantly enhance environmental investment by firms, and this relationship is robust to different specifications and alternative measures; (2) three possible channels are the improved levels of justice and enforcement of environmental protection, and the mitigation of local government intervention; (3) our findings are particularly pronounced in subsamples with severe local protectionism, state-owned enterprises (SOEs), and non-SOEs with political connections; (4) at the city-level, environmental courts significantly increase air quality and promote cities to cross the inflection point of the environmental Kuznets curve earlier. Overall, this paper reveals the micro-mechanisms behind the real effects of environmental justice on firm environmental investment, thus providing timely implications for regulators concerned with environmental protection.

Keywords: Environment courts; Environmental protection expenditure; Quasi-natural experiment; Local protectionism; China (search for similar items in EconPapers)
JEL-codes: G31 K42 Q53 Q58 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jeem.2019.102254

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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

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