Centralization and regulatory enforcement: Evidence from personnel authority reform in China

Abstract

This paper examines the impacts of the centralization of authority in the appointment of civil servants on the effectiveness of regulatory enforcement efforts. We exploit a unique personnel reform in China’s Environmental Protection Bureaus (EPBs), which shifts the power to appoint local EPB directors from municipal governments to the provincial level. Based on detailed personnel records and administrative punishment data, we find that local EPB directors under centralized personnel authority increase the number of punishments and the total amount of fines by 13.0% and 19.0%, respectively. The impact on environmental enforcement remains of comparable magnitude even after 3 years, resulting in improved environmental quality. We identify three possible mechanisms driving this positive effect: the reduction of distorted incentives, the enforcement of objectives with interjurisdictional externalities, and the selection of more qualified appointees. Our analysis contributes to the understanding of the consequences of the recent trend toward “reverse decentralization” in institutional settings.