Water Pollution Progress at Borders: The Role of Changes in China’s Political Promotion Incentives

At political boundaries, local leaders have weak incentives to reduce polluting activity because the social costs are borne by downstream neighbors. This paper exploits a natural experiment set in China in which the central government changed the local political promotion criteria and thus incentivized local officials to reduce border pollution along specific criteria. We document evidence of pollution progress with respect to targeted criteria at province boundaries. Heavy metal pollutants, not targeted by the central government, have not decreased in concentration after the regime shift. Using data on the economic geography of key industrial water polluters, we explore possible mechanisms. (JEL D72, O13, O18, P25, P28, Q25, Q53)