Policy uncertainty and air pollution: Evidence from the turnover of local officials in China

Abstract

This paper examines the impact of policy uncertainty on air pollution, using the turnover of local officials in China as a quasi-natural experiment. The results from the two-way fixed effects model show that policy uncertainty caused by the turnover of different officials produces contrasting effects on air pollution. While the turnover of the mayor has no effect on air pollution, the turnover of the municipal party committee secretary deteriorates it. Two-Stage Least Square estimation confirms these results where the age and tenure of officials were used as instrumental variables of policy uncertainty. The results are robust after endogenous treatments and robustness tests. The mechanism analysis further indicates that policy uncertainty worsens air quality by weakening environmental regulation and crowding out green innovation. Moreover, the impact is more pronounced in smaller and less developed cities. The conclusions provide policy implications for environmental governance in the period of policy uncertainty.