Collaborative regional pollution control and industrial land acquired by polluting firms in border areas–evidence from the air pollution joint prevention and control policy in China

Abstract

Unclear environmental jurisdictions and weak enforcement in administrative border areas encourage polluting firms to cluster there by acquiring land to centralize production. Local governments, motivated by fiscal revenue, also sell land to these firms. Reducing such clustering is crucial for lowering border pollution and promoting high-quality development. Using China's air pollution joint prevention and control (AJPC) pilot policy as a quasi-natural experiment and a multi-period DID approach, this study finds this collaborative regional pollution control policy significantly curbs industrial land acquisition by air-polluting firms in border areas, with spillover effects on other polluters. Mechanism tests reveal that the policy operates through both supply and demand channels: it alters local governments' land supply incentives by reducing allocations to air-polluting firms, while also increasing production costs, tightening financing constraints, and raising green awareness, thereby lowering polluting firms' land demand in border areas. Further analyses show that the AJPC policy's effectiveness varies with local officials' traits and environmental awareness of governments and firms. The policy mitigates regional pollution by restricting industrial land acquisition by polluting firms in border areas. Our findings enhance understanding of how regional pollution collaboration drives land reallocation in border areas, providing evidence to improve environmental policies.