Abstract
This paper estimates air pollution spillover effects in Chinese cities. Estimation of this spillover effect is complicated because neighboring cities share similar business/pollution cycles, and changes in wind direction can be frequent. To circumvent these empirical challenges, we propose a new approach exploiting spatial and temporal variations in PM2.5 concentrations for major cities in China’s Eastern Monsoon Region during the monsoon season. We find large pollution spillover effects. Estimates based on our preferred model specification suggest that a city’s average PM2.5 concentration increases by 0.33 (or 0.26) units during the winter (or summer) monsoon season, if PM2.5 concentrations in cities upwind of this city increase by one unit. Estimated spillover effects in plain and non-plain regions are 14%–16% larger and 45%–71% smaller, respectively, than the baseline estimates. The percentage contributions of PM2.5 pollution from upwind cities to local PM2.5 levels vary by region and can be as large as 50%.
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