Air pollution and economic growth under local government competition: Evidence from China, 2007-2016

This study employs spatial simultaneous equations models with the Generalized Spatial Three-Stage Least Squares (GS3SLS) method to evaluate the interrelationship between economic growth and air pollution under local government competition for China's "2 + 26 " cities from 2007 to 2016. The results show an unbalanced spatial agglomeration effect of economic growth and air pollution across the region. Findings indicate that air pollution accompanies economic growth in the "2 + 26 " cities, and economic growth has a U-shaped relationship with air pollution. Moreover, tax income and foreign investment competitions increase air pollution. Suggestions for the "2 + 26 " cities include organizing a cross-regional agency for integrated management of the economy and air quality, constructing multiple economic-center cities, reforming the political promotion mechanism, and developing the ecological compensation mechanism for air pollution.