Accountability, Career Incentives, and Pollution: The Case Of Two Control Zones in China

Abstract

We provide empirical evidence on the effectiveness of target-based performance evaluation for bureaucrats in the context of the Two Control Zones policy in China. In 2006, the Chinese central government made sulphur dixoide (SO2) emissions cuts a major performance evaluation criterion for prefectural city mayors and party secretaries. We compare emissions reductions in these so-called Two Control Zone cities, where more stringent emissions quotas were imposed, with reductions in non-control cities. Our results suggest that the new evaluation system is effective in achieving the target policy output. Adding the emission cuts into local bureaucrats’ performance evaluation significantly reduces the actual SO2 emissions. We further analyze the channels through which the policy operates and show that the new evaluation system changes bureaucrats’ behavior and induces them to exert more effort on controlling environmental pollution.