Research

Pollution Haven Next Door: Evidence from China

Qi Zhang

The Pollution Haven Effect (PHE) predicts that environmental regulation shifts pollution-intensive production toward less regulated regions. This paper tests the PHE within a single country by examining the Key Cities Air Pollution Control policy, a city-specific air quality program in China. Using a synthetic difference-in-differences design to correct for targeted policy placement, I estimate the policy’s effects on sulfur dioxide emissions and industrial composition in treated and neighboring cities. The results reveal limited overall emission reductions but clear evidence of spatial reallocation: under half a decade, treated cities shift pollution toward cleaner sectors, while neighboring cities expand output and capital in pollution-intensive industries, consistent with inter-city pollution leakage. Further analysis shows that this reallocation was driven largely by provincial governments strategically using state-owned enterprises to redistribute production, with a secondary role for firm-level product switching. These findings demonstrate that environmental regulation can generate PHE-type outcomes in the short term, driven by non-market forces, and that well-intentioned policies may reshape regional industrial structures in unintended ways.

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First in Use, First in Right, First in Productivity? The Empirics of Prior Appropriation in the Colorado River Basin

Peter Debaere, Tianshu Li, Qi Zhang, Swatantra Sharma, Mesfin Mekonnen

Prior appropriation is a water rights system that allocates water access based on seniority. With microdata from diverting structures in a large water-stressed sub-basin of the Colorado River, we examine whether agricultural productivity increases with seniority and assess the rights system’s overall allocative efficiency. Drawing on data from 2013 to 2022, we investigate how productivity interacts with the decision of prior appropriations’ marginal users to withdraw water in excess of their water rights when prior appropriation is temporarily suspended (i.e., under the free river condition). Probit analysis reveals that excess use is more likely for more productive users, indicating potential for efficiency improvements within the system. Suspending prior appropriation does not lead to wasteful water use but may enable productivity gains—similar to those observed in water markets. Instrumental variable analysis confirms that the most secure rights holders with senior access during suspension periods are not more likely to engage in excess use. However, senior rights associated with smaller allocations do exhibit excess withdrawals, highlighting institutional nuances in how water is accessed.

Making a Call on the River: Water Use in the Colorado River Basin

Qi Zhang, Peter Debaere, Tianshu Li

We exploit the “call” system, where a senior downstream user’s call temporarily suspends upstream junior withdrawals, to study the dynamic effects of water-right enforcement. Using an event-study design comparing affected structures to never-called structures, we aim to causally estimate how calls alter water-use behavior and assess implications for overall water-use efficiency.