Law enforcement under top-down pressure : evidence from China’s environment inspection action

Abstract

Local governments usually lack incentives to strictly enforce environmental regulations due to local economic concerns, yet the role of top-down inspection and monitoring may help alleviate this dilemma. This paper takes advantage of an exogenous shock, China's Environment Inspection Action (CEIA, Zhongyang Huanbao Ducha), to empirically examine the impact of a centering inspection on the enforcement of the local Environmental Protection Agencies (EPAs). Using data from 353,367 environmental administrative penalties across mainland China from 2015 to 2020 and a generalized difference-in-differences specification, we find that, given other things being equal, the number of penalties increased by an average of 20.6% due to the action, while the average amount of penalty fine did not change significantly. Further analysis shows that the CEIA mainly promotes the investigation efforts of loagenciesency on those trivial cases with mifinesm fine, as well as the most serious cases with minimum fine. The heterogeneity analysis indicates that more private enterprises and local enterprises, compared to the state-owned enterprises and non-local enterprises, were fined during the inspection. We argue that although centering inspection increases the incentive of local agencies for regulation implementation, and leads to more intense and strict enforcement, it is not omnipotent but probably costly as well as short-lived. On the one hand, local agencies might carry on flexible regulation standards and exploit other strategies to meet the requirement of inspection and escathepe from mothe nitor, which might undermine thmarketan and create uan nfair entering barrier; on the other hand, the improvement in air quality is a short-term effect that begins to diminish after 90 days and eventually vanishes after 360 days.