A pollution paradox? The political economy of environmental inspection and air pollution in China

To scrutinize the implementation of environment policy by local governments, the central government dispatched inspection teams to all the provinces across China. Do the central inspections effectively encourage local politicians to implement environment policy and improve air quality? In this paper, we assess the impact of the central inspection on urban air pollution, using daily pollution and weather data for 130 Chinese cities over 2016-2017 and employing both difference-in-difference and regression discontinuity design methods. Our main finding is that, compared to uninspected provinces, the inspected provinces experience statistically significant improvement in air quality. Particularly, the significant negative effect of inspection on air pollution is mainly reflected in PM2.5, the pollutant about which the public is most concerned and main assessment indicator for controlling air pollution by the central government. However, the improvement in air quality turns out to be short-term effect, followed by higher air pollution after the inspection. We also conduct heterogeneous analysis and find that the later rounds of inspection, key control areas, and regions with higher level of economic development are more sensitive to the inspection with sizable reduction effects on air pollution, compared to the first round of inspection, non-key control areas and less economic development regions. In addition, we perform a series of robustness checks to confirm that our findings are stable and reliable.