【 The Digital Star Seminar Series No.25 】The Political Economy of Ratchet Effect: Evidence from China’s Environmental Regulation

Date: 14 October 2022 (Fri) 
Time: 3:00pm - 4:30pm (Hong Kong Time, UTC+8)
Platform: Tencent Meeting (ID 840-766-855)

Host: Prof. Miaojun Wang (School of Economics, Zhejiang University)

Presenter: Prof. Li-An Zhou (Peking University)

Abstract：

The ratchet effect has been extensively studied in the dynamic incentive theory while empirical evidence remains limited. This paper takes advantage of China’s recent introduction of minimum performance targets in air pollution controls and regional variation in the duration of target assignment to examine the ratchet effects in the response of local officials to air pollution control targets. Aided by an illustrative model characterizing local officials' incentives in fulfilling air pollution control targets with or without the prospect of being ratcheted, we employ a Regression Discontinuity Design to find that the air quality will be significantly deteriorated after local officials fulfill the minimum targets ahead of schedule, and this response is independent of whether local officials face the prospect of being ratcheted. By contrast, when local officials fail the minimum targets and try to make up for the failure to avoid severe punishment, the prospect of being ratcheted would weaken the make-up efforts of local officials. We further discover that job rotation, political competition, or strengthened central supervision could effectively mitigate the ratchet effect, which is consistent with the model predictions.

Intro to Prof. Li-An Zhou:

Li-An Zhou is the director of the Department of Economics and Management of Peking University, a member of the Academic Committee of Peking University, a Boya Distinguished Professor of Peking University, and a Changjiang Distinguished Professor of the Ministry of Education. His research fields mainly involve political economy, industrial organization, economic transformation and development. He has published more than 60 papers in American Economic Review, Review of Economics and Statistics, RAND Journal of Economics, Journal of Public Economics, Economic Journal, Journal of Development Economics, Journal of Economic History, Strategic Management Journal, Economic Research Journal, Social Sciences in China, Management World and other domestic and foreign first-class economics and management journals.

Organization：

- The Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy

- China Digital Economy Research Center of School of Economics, Zhejiang University

- Zhejiang University Digital Economy Innovation Research Team

Intro to The Digital Star Seminar Series：

The Digital Star Seminar Series is co-hosted by the China Digital Economy Research Center of School of Economics, Zhejiang University, and the Chinese University of Hong Kong-Zhejiang University Joint Research Center for Digital Economy. This series of seminars will study the development of the digital economy and China's economic transformation based on the practice of China's digital transformation. We will invite domestic and overseas scholars to share and discuss the latest research on the digital economy and the Chinese economy. We hope that this academic platform can become a paradise for the study of the digital economy. More importantly, it can generate insights that significantly impact the digital economy and Chinese economy, which will help promote digital transformation and high-quality economic development in Chinese society.