Does campaign-style environmental regulation induce green economic growth? Evidence from China's central environmental protection inspection policy

Abstract

Well-designed environmental regulations are a prerequisite for achieving green economic growth. However, the effectiveness of campaign-style environmental regulation—a widely used environmental management instrument in developing nations or even in some developed nations, on green economic growth remains under-researched and has not reached a consistent conclusion. This paper takes advantage of China's Central Environmental Protection Inspector policy—the strictest and largest campaign-style environmental regulation policy in China's history, as a natural experiment and uses the difference-in-differences method to explore the effect of campaign-style environmental regulation on green economic growth, and further analyze its underlying mechanisms and heterogeneity effects. The panel data covering 280 prefecture-level cities in China from 2009 to 2019 are used. Our results show that Central Environmental Protection Inspector can result in an average of 14.2% increase in green economic growth, and this effect is sustainable for a long time. Mechanism analysis shows that Central Environmental Protection Inspector boosts green economic growth mainly by promoting green innovation and optimizing industrial structure. Further heterogeneity analysis reveals that the positive effect of Central Environmental Protection Inspector on green economic growth is greater in eastern China and underdeveloped cities.