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Managerial Incentives for Environmental Protection in Chinese-Style Federalism

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Friday, 27 April 2018, 12:30

Friday, April 27, 2018. 12:30PM. Managerial Incentives for Environmental Protection in Chinese-Style Federalism. Yuanyuan Yi, World Bank. Sponsored by Department of Agricultural, Food, and Resource Economics. More information here.

Abstract: China's fast economic growth has come at the expense of environmental quality and the degradation of natural resources such as forests. In this paper, we identify career concerns by managers of state-owned enterprises that manage natural resources, and asymmetric information between managers and their superiors regarding the enterprises' environmental performance, as sources of environmental degradation. A manager of such an enterprise is the agent of two principals: national and sub-national governments. As well as needing to meet ecological targets imposed by the national government, a manager wants to be promoted into the ranks of the sub-national government. We develop three hypotheses based on a theoretical model with two principals and one agent. We then empirically test these hypotheses for the case of China's northeastern state-owned forests, combining satellite imagery data on deforestation with economic survey data. Our findings suggest that managers of state forests that have a larger area and volume, and are thus more difficult to monitor with respect to ecological targets, log more timber and are more likely to deforest. The same holds true for managers who share a larger percentage of profits with the local government. In turn, we  find that sharing more revenue with the local government increases the likelihood of getting promoted.

Bio: Yuanyuan Yi currently works at the World Bank’s Development Research Group. She holds her PhD in Economics from University of Gothenburg, Sweden. Her research interests include Environmental and Resource Economics, Development Economics, and Applied Econometrics. Her previous and current work include impact evaluation on China’s forest devolution reform in collective forest areas, China’s state-owned forest management, and impact evaluation on Zambia’s Climate Smart Agriculture project. Link to webpage:

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