Central environmental protection inspection, environmental quality, and economic growth: evidence from China

How to enhance local governments' enforcement of environmental regulations in developing countries? Whether central inspection can properly motivate local governments to implement environmental regulations, and how would it affect economic growth? This paper examines the effectiveness of China's Central Environmental Protection Inspection (CEPI) program, which aimed to promote local governments' enforcement of environmental regulations through central inspection. Using a difference-in-differences approach, we find that the CEPI program caused a significant reduction in air pollution and economic growth, indicating that the CEPI program introduced a substantial trade-off between environmental quality and economic growth. Further analysis shows that the effect of this program on air quality and economic growth is temporary. Moreover, we find that the effect is more significant when the local officials with higher promotion potential. Further cost-benefit analysis suggests that the cost of the CEPI program far exceeds its benefit.