Optimal Environmental Policy for Heterogeneous Governments in China

Ren Wang, Yuxiang Bian (), Han Gao and Jie Hou
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Ren Wang: Business School, East China University of Political Science and Law, Shanghai 201620, China
Yuxiang Bian: Business School, East China University of Political Science and Law, Shanghai 201620, China
Han Gao: Business School, East China University of Political Science and Law, Shanghai 201620, China
Jie Hou: International School of Economics and Management, Capital University of Economics and Business, Beijing 100070, China

IJERPH, 2023, vol. 20, issue 4, 1-12

Abstract: The purpose of the article is to study how the shift in the developing philosophy of China’s central leadership has impacted the management style of China’s local governments and, in turn, the country’s economic and environmental equilibrium. We use a real business cycle model with environmental variables and divide governments into those with/without environmental concerns and into those with long- and short-term policy horizons. We find that forcing local governments to plan in the long run is effective only when those governments are simultaneously mandated to consider the environment to be as important as the economy. Theoretical results show that both output and pollution levels are highest under governments without environmental obligations, intermediate under long-term governments with environmental obligations, and lowest under short-term governments with such obligations.

Keywords: government type; pollution emission; optimal environmental policy (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2023
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