Balancing Development and the Environment in a Changing World: Expressways, GDP, and Pollution in China

Guojun He, Yang Xie () and Bing Zhang
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Yang Xie: Department of Economic, University of California, Riverside

No 2017-43, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: When productivity changes, how would an economy rebalance economic production and environmental preservation? We develop a conceptual framework to analyze the question, and predict that a productivity shock can have heterogeneous impacts on environmental quality and income. Exploiting a quasi-experiment provided by the dramatic expansion of China’s national expressway system, we find empirical evidence that is consistent with the model’s predictions: expressway access increases both pollution and GDP in initially poor counties, decreases pollution and GDP in initially rich counties, and decreases pollution while increasing GDP in counties with moderate levels of initial income. These findings cannot be fully explained by alternative theories such as the pollution haven hypothesis and home market effect.

Pages: 69 pages
Date: 2017-08, Revised 2017-08
New Economics Papers: this item is included in nep-cna, nep-ene, nep-env, nep-res and nep-tra
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