Do new mayors bring fresh air? Some evidence of regulatory capture in China

Abstract

This paper provides evidence of regulatory capture in China’s environmental regulation by exploring the relationship between subnational leaders’ tenure and local firms’ environmental protection behaviors. We find that firms discharge more exhaust and make less effort to abate air pollution when mayors’ tenure increases. The results are robust to alternative specifications and measures, but show heterogeneity across regions and ownerships. The intensity of regulatory capture depends on institutional factors and firm characteristics. This study enriches the literature by analyzing regulatory capture under a regionally decentralized authoritarian system and provides clear policy implications for preventing regulatory capture.