Environmental political business cycles: the case of PM2.5 air pollution in Chinese prefectures

Chinese local leaders' behaviors are driven by a career incentive structure in which those delivering better performances are more likely to be promoted. Local leaders signal competence when their superiors actively collect evidence to evaluate their performances: these are years leading to the end of a five-year term. To create better economic performances, local leaders lessen the enforcement of environmental regulations to reduce local industries' production costs and/or to attract firms from other jurisdictions. Such selective enforcement creates an environmental political business cycle in which pollution increases in years leading to the year of leader turnover. The empirical analysis on a panel of Chinese prefectures of 2002-2010 reveals a U-shaped relationship between a prefecture's party secretary's years in office and its average annual PM2.5 level.