The Price of Becoming a City: Decentralization and Air Pollution—The Evidence from the Policy of County-to-City Upgrade in China

Abstract

It is necessary to reassess the pollution effects of decentralization reforms to improve the future policy design for better economic and social development in the postepidemic era. This study examines the relationship between decentralization and air pollution by exploiting the policy of County-to-City Upgrade in China from 2005 to 2018. Upgrading empowered new cities in fiscal, administrative, and economic matters without changing the political hierarchy. Under the cadre evaluation system, the new county-level city government preferred to increase construction land area and attract more polluting firms to promote economic development, and air pollution became more severe. Heterogeneity tests found that when the new city was located in eastern China or was away from the provincial boundary, decentralization would induce more severe air pollution. Overall, decentralization without a supplementary incentive rule has a negative effect on air pollution.