Smoke and Mirrors? Systematic Manipulation of Air Quality Data by Chinese Municipalities

Abstract

How can national level leaders get local officials to engage in costly effort to mitigate the environmental costs of economic growth? Conventional wisdom holds that where the effort of local officials is unobservable, national level leaders can link the promotion of local officials with their unobservable efforts vis-a-vis observable performance measures making costly effort incentive compatible. However, what if local officials can also choose to exert costly effort to manipulate observable performance measures? Using daily air quality data from Chinese municipalities, I seek to show that manipulation positively tracks term in office of municipal-level officials suggesting that such an institutional solution is not nearly as efficient as conventional wisdom holds.