Association for Public Policy Analysis & Management

Environmental race to the bottom is a strategy that local governments commonly use to retain the level of efforts on environmental protection and regulation. Thus, their level of efforts is much lower than the level that could compatible with their technological and institutional capacity, on the one hand, and largely determined by their political and/or economic competitors’ level of efforts, on the other. However, empirical studies show mixed evidence on the environmental race to the bottom. Some scholar found evidence supporting the environmental race to the bottom (e.g. Konisky, 2007; 2008), while some other evidence contradicts to the expectations of the environmental race to the bottom (e.g. Millimet and List, 2003; Potoski, 2001; Prakash and Potoski, 2006). The mixed results, to large extent, are derived from two limitations of existing studies. First, environmental race to the bottom may not have homogenous effects across all the local environmental regulators, as they may face diverse incentives either set by the environmental agency at the central/federal level or under the pressure of local residents. Second, as technological and institutional capacities keep increasing, improved environmental standards may result from the advanced technology rather than the efforts of the local governments.

To address these two limitations, this paper studies the environmental race to the bottom by investigating the impacts of biased regulation on local governments’ behavior. Specifically, the paper examines two different competitions among local governments. Positive competition refers that local governments try their best within the allowable scope of their resource and capacity to compete with and outstand their peers. In contrast, following Konisky (2007), race to the bottom here means that local governments relax their environmental regulation in order to gain a competitive advantage over other states. The paper argues that fair regulation is more likely to encourage positive competition, as it configures an incentive for the local governments to perform well. However, biased regulation, both over- and under-punishment would strengthen the strategies of “race to the bottom” among the local governments because of the distorted incentives.

This study tests the hypotheses based on the empirical evidence of 31 provinces of China from 2007 to 2015. Data are collected from official documents on regulatory decisions and various statistical yearbooks. The dependent variable, as presented, is the strategy of competition. I will use the lagged variance of the environmental performance for the prefectures within each province to capture the competition strategy. In specific, relative homogeneous variances across time would reflect a positive competition, since the performance reveals the capacity differences of the localities which could be hardly changed within a decade. In contrast, the strategy of race to the bottom will present heterogonous variances and the variances of performance would be smaller as the years go. The key independent variable is the score of biased regulation on each province, which will be calculated based on the percentage of prefectures within a province that being biased sanctioned by the Ministry of Environmental Protection.