Title: The Environmental and Economic Consequences of Internalizing Border Spillovers

Speaker：Shaoda Wang，University of Chicago 

Time：10:00 - 11:30 am, 20 November, 2020

Onilne seminar

About the speaker:

Shaoda Wang is a postdoctoral scholar at the Department of Economics, University of Chicago. In 2021, he will be joining the Harris School of Public Policy as an assistant professor. He is an applied economist with research interests in development economics, environmental economics, and political economy. Prior to Chicago, he got his B.A. from Peking University in 2014, and his Ph.D. from UC Berkeley in 2019.

Abstract:

This paper studies how centralized decision-making can help local governments internalize regional environmental spillovers, and investigates the associated economic and welfare consequences. Utilizing novel firm-level geocoded emission and production panel datasets, and exploiting more than 3000 cases of township mergers in China, we find that as township mergers eliminate the borders between neighboring townships, the negative externalities of polluting firms located on these borders are suddenly internalized by the new jurisdiction. As a result, these firms spend more effort on emission abatement, which leads to lower emissions, as well as lower output and profit levels. Further analysis suggests that household welfare improves with the internalization of border spillovers, as reflected by increased residential land price around the merging borders.