Can the government environmental vertical reform reduce air pollution? A quasi-natural experiment in China

Abstract

Addressing environmental challenges is crucial for mitigating and adapting to the consequences of climate change. The existing literature investigates whether government environmental reform can address environmental problems but yields conflicting findings. This study examines the effect of government environmental vertical reform (GEVR) on air pollution. Using city-county mergers in China as a quasi-natural experiment, satellite imagery, and socio-economic data from 2000 to 2016, we observe that GEVR reduces a noteworthy 4% air pollution in reformed counties based on a staggered Difference-in-Differences (DID) design. Mechanism analysis reveals that GEVR cuts air pollutant emissions by optimizing resource inputs and mitigating the impact of polluting firms. Heterogeneity analysis demonstrates whether the reformed counties located at administrative boundaries and the reform strategy influence the effectiveness of GEVR. In the future, policymakers should contemplate suitable government environmental reforms to tackle forthcoming climate change challenges.