Can Technology Solve the Principal-Agent Problem? Evidence from China’s War on Air Pollution

Michael Greenstone, Guojun He, Ruixue Jia and Tong Liu ()
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Tong Liu: The Hong Kong University of Science and Technology - Division of Social Science

No 2020-87, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: We examine the introduction of automatic air pollution monitoring, which is a central feature of China’s “war on pollution.†Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find that reported PM10 concentrations increased by 35% immediately post–automation and were sustained. City-level variation in underreporting is negatively correlated with income per capita and positively correlated with true pre-automation PM10 concentrations. Further, automation’s introduction increased online searches for face masks and air filters, suggesting that the biased and imperfect pre-automation information imposed welfare costs by leading to suboptimal purchases of protective goods.

Keywords: Technology; automation; air pollution; China; monitoring and surveillance; moral hazard; data quality (search for similar items in EconPapers)
Pages: 45 pages
Date: 2020
New Economics Papers: this item is included in nep-cna, nep-ene and nep-env
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Citations: View citations in EconPapers (20)

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