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

Michael Greenstone (), Guojun He, Ruixue Jia and Tong Liu

No 27502, NBER Working Papers from National Bureau of Economic Research, Inc

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 PM 10 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 PM 10 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.

JEL-codes: Q53 Q55 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-cna, nep-ene, nep-env and nep-tra
Note: EEE
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