Description
5 full pages! size 12, double space This is real data from real published papers, and they are often very messy. The idea is more to get you trying to pick the right variables, do the right analysis, and pick the right kind of graph. If you miss on sample restrictions or exact formulas that is OK. Please specify which tables or figures you’re trying to replicate. In the paper assignment requirements, It says four articles to pick up. I already pick up. It is “Zheng” article which is attach below the assignment requirements.
I wouldn’t go more spacing than 1.5, or larger than 12 point font. Just use defaults for font and margins etc. If you’re fully putting in 3 figures and your own results in some kind of table then it will not be hard to hit at least 5 pages. – Try to have your figures be a reasonable size. No strict cutoff but obviously if you have a 5 page paper with 3 pages of figures I’ll notice. – There’s no strict requirement for how long each section has to be, but I’d try to avoid using more than about 1/3 of your paper on any one section. It will be easy to spend a lot of time in the summary and very little in the critique, but I’d like to see serious effort in all 4 parts. – I also wouldn’t go less than, say, 15% for any section. So if you have a 5 page paper you’d want at least 3/4 of a page for everything
A New Era of Pollution Progress in
Urban China?
■ Siqi Zheng is Samuel Tak Lee Associate Professor at the Department of Urban Studies and
Planning, Massachusetts Institute of Technology, Cambridge, Massachusetts; and Visiting
Professor at Hang Lung Center for Real Estate, Tsinghua University, Beijing, China.
Matthew E. Kahn is Professor of Economics, University of Southern California, Los Angeles,
California, and a Research Associate, National Bureau of Economic Research, Cambridge,
Massachusetts. Their email addresses are zhengsiqi@gmail.com and kahnme@usc.edu.
† For supplementary materials such as appendices, datasets, and author disclosure statements, see the
article page at
https://doi.org/10.1257/jep.31.1.71 doi=10.1257/jep.31.1.71
Siqi Zheng and Matthew E. Kahn
72 Journal of Economic Perspectives
had become acute by the 21st century, when consumption of coal took off. As one
vivid example of the linkage from economic growth to air pollution, China’s annual
consumption of coal increased from less than 700 million to almost 4 billion tons
between 1980 and 2012. Figure 1 shows that in the late 1990s, China consumed
about one-third as much coal as the rest of the world combined. By 2012, China
was consuming almost as much coal as the rest of the world combined. Such coal
burning has caused China’s aggregate carbon dioxide emissions to soar. China’s
share of global carbon dioxide emissions has increased from 12.8 percent in 2000
to 23.6 percent in 2012.
China’s combination of coal-burning and rapid industrialization has increased
a number of pollutants, including sulfur dioxide and nitrogen oxides, but for
simplicity we will focus much of our discussion on particulate matter (Guan et. al.
2014; Chen, Ebenstein, Greenstone, and Li 2013). In 2016, 56 percent of China’s
population lives in cities, and this percentage will grow over time. China’s hundreds
of cities differ with respect to their environmental quality. For example, Xiamen
is a coastal city with relatively clean air, while Beijing has severe fog and haze: the
average PM2.5 concentrations in these two cities in the 2013–2014 winter were 45
and 108 μg/m3, respectively. For an international historical perspective, Beijing’s
ambient total suspended particulates was 118 μg/m3 in 2011, while Pittsburgh’s 1960
concentration for total suspended particulates was 160 μg/m3 (Davidson 1979).
Figure 1
Coal Consumption in China and the Rest of the World
(million short tons)
Source: US Energy Information Administration, https://www.eia.gov/cfapps/ipdbproject/IEDIndex3.
cfm?tid=1&pid=1&aid=2.
1,000
0
500
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1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
China
The Rest of the World
Siqi Zheng and Matthew E. Kahn 73
In this essay, we begin with an overview of the broad institutional background
and drivers that led to China’s pattern of urban development. We look at the rise in
air pollution over recent decades, and the perhaps surprising finding that in many
of China’s urban areas, PM10 levels have been decreasing during the last 10–15 years.
We then turn to the costs and tradeoffs of air pollution, including costs to human
health, reductions in worker productivity, and how people are seeking to reduce
their exposure to pollution as shown by compensating differentials in real estate
prices and purchases of masks and air filters. We discuss how rising incomes tend
to raise the demand for environmental amenities, and thus increase political pressure
for environmental protection, and then we turn to the policy tools that China
has used to reduce pollution. We conclude by arguing that as China’s government
is preparing for an additional 300 million people to move to urban areas over the
next 30 years, it will have a number of opportunities for China to reduce pollution
through a shift from manufacturing to services, along with various steps to improve
energy efficiency and resource conservation. Overall, we will argue that China is on
track to improve its environmental performance in the years ahead.
The Rise of China’s Highly Polluted Industrial Cities
In the early years of the Chinese Communist Party (CCP), its leaders sought
to minimize transportation costs by locating factories for heavy manufacturing
industries close to the Soviet Union, China’s main trading partner at that time.
Environmental protection goals were not prioritized. During the First Five-Year
Plan, between 1953 and 1957, 156 national industrial projects were built with the
help of the Soviet Union. Those projects were mainly located in the cities in the
Northeast Region and the Central Region, shown by black dots in Figure 2A. The
Central Region has a large endowment of coal. The Northeast Region had a better
pre-existing industrial base, along with infrastructure left over from the Japanese
occupation during World War II.
As foreign relations soured between China and the Soviet Union during the
late 1950s and into the 1960s, China became concerned about bolstering national
defense. Mao initiated the “Third Front” construction movement which included
investing in 13 provinces within its core area in the Northwest and Southwest, shown
as the shaded area in Figure 2A. More than 1,100 large and medium-sized projects,
such as Panzhihua Iron and Steel, and Second Auto Works, were established during
the Third Front period (1964–1978). Dozens of cities, such as Mianyang, Deyang,
and Panzhihua in Sichuan, Guiyang in Guizhou, and Shiyan in Hubei, emerged as
major industrial cities. By deciding to specialize in heavy industry while using coal
as the major energy source, China’s central planners chose a pollution-intensive
growth policy. These initial conditions persist and influence the economic geography
of China’s pollution today.
Starting in the early 1980s, China transitioned from a centrally planned
economy to a market economy. Transportation costs relative to global markets came
74 Journal of Economic Perspectives
to play an increasingly important role in determining the locational choice for a
profit-maximizing firm. China’s coastal cities in the Eastern Region feature access
to global markets and thus became the most attractive locations for private manufacturing
firms (Zheng, Sun, Qi, and Kahn 2014c). The black triangles in Figure 2B
represent the “coastal open cities” and “special economic zones” specified by Deng
Xiaoping. In the mid-2000s, more than 65 percent of manufacturing employment
in above-scale industrial firms (with annual sales above 5 million RMB) was located
in the coastal region, as compared to 42 percent in 1980. The geographic concentration
of this production has meant that certain industrial cities are the epicenters
of pollution hot spots.
Figure 3 presents a time series of coal and steel production since the establishment
of the People’s Republic of China (1949–2015). Both production indicators
climb steadily after the early 1980s when the economic reform was initiated and
then exhibit very rapid growth after China joined the World Trade Organization in
2001. In recent years, such production has declined.
Air Pollution
During the last decade or so, China’s major cities—such as Beijing and
Shanghai—have experienced improvements in urban air pollution. Figure 4A
shows the average particulate matter level as measured by PM10 in these cities
between 2001 and 2013. During these years—when both cities experienced population
growth and significant per-capita income growth—Beijing’s PM10 levels have
declined by 39 percent and Shanghai’s by 20 percent. On the other hand, some
Figure 2
The Geography of Industrial Production in China after 1949
Source: Authors using information from Wikipedia.
A: Industrial Cities/Regions Developed 1953−1978 B: Industrial Cities Developed 1979−1997
1953−1957
1964−1978
1979−1997
A New Era of Pollution Progress in Urban China? 75
heavy industrial cities such as Shijiazhuang in Hebei Province and Zaozhuang in
Shandong Province, shown in Figure 4B, saw a rise in PM10. But overall, Figure 5
presents the population-weighted average PM10 concentration for 85 Chinese cities,
and also this measure for the two cities ranked at the 25th and 75th percentiles of
the PM10 distribution across those cities. These three numbers have all declined
during this period.
Figure 3
Coal and Steel Production in China (1949–2015)
(100 million tons)
Figure 4
Air Pollution in Selected Chinese Cities, 2001–2013
Source: China Automotive Industry Yearbook, China Energy Statistical Yearbook, and China’s Economic Statistics
Bulletin.
Source: The PM10 concentration data are calculated from the official Air Pollution Index (API) use the
API calculation formula. Both API and its formula are obtained from the Data Center of the China’s
Ministry of Environmental Protection (http://datacenter.mep.gov.cn/).
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Steel
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Steel
A: PM10 in Beijing and Shanghai B: PM10 in Shijiazhuang (Hebei) and
Zaozhuang (Shandong)
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Beijing
Shanghai
PM10 (μg/m3)
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Zaozhuang
PM10 (μg/m3)
76 Journal of Economic Perspectives
In recent years, PM2.5 has become the primary air pollutant of concern in many
large Chinese cities. China’s Ministry of Environmental Protection (MEP) started to
report PM2.5 readings in major Chinese cities in 2013. The US Embassy in Beijing
has been releasing PM2.5 data around its location (in downtown Beijing) since 2008.
Figure 6 presents three time series—the long time series from the US Embassy in
downtown Beijing, and two short time series for the average PM2.5 readings in Beijing
and Shanghai from MEP. The two time series for Beijing have similar trends in the
short time period (the downtown US Embassy’s reading is slightly higher than the
Beijing average). Shanghai’s pollution level is much lower than Beijing’s. Beijing’s
PM2.5 level reached its lowest level in 2008, when the Olympic Games were held in
Beijing and the government implemented many short-run regulations to control
the pollution. After that, the PM2.5 concentration has averaged around 100μg/m3,
and it is worse in the winter due to coal-based heating.
Air pollution can drift across regions, just as industrial water pollution can flow
downstream. In major urban cities such as Beijing and Hong Kong, much of the
air pollution is caused by emissions from nearby regions. This cross-boundary spillover
problem is most severe when a city is adjacent to a very dirty neighbor, such
as the Hebei Province near Beijing and the Guangdong Province near Hong Kong.
According to the latest report on PM2.5 sources conducted by a research group
within the Ministry of Environmental Protection, Hebei Province, which produces a
significant chunk of the entire world’s steel, contributed to 18 percent of the PM2.5
Figure 5
Chinese Urban Population PM10 Exposure for 85 Cities
Source: Same as Figure 4.
Note: Figure 5 presents the population-weighted average PM10 concentration for 85 Chinese cities, and
also this measure for the two cities ranked at the 25th and 75th percentile of the PM10 distribution across
those cities.
60
2002 2003 2004 2005
25th percentile
Population
weighted average
75th percentile
2006 2007 2008 2009 2010 2011 2012
80
100
120
140
PM10 (μg/m3)
Siqi Zheng and Matthew E. Kahn 77
in Beijing and 20 percent in Tianjin (Ecns.cn 2016). Hong Kong has also suffered
from nearby industrial emissions drifting into its airspace. In the Pearl River Delta,
about two-thirds of air pollutant emissions are from industrial cities in Guangdong
Province such as Dongguan and Foshan. Indeed, since 2008, Hong Kong has paid
manufacturers in Guangdong Province about $150 million every year to install
pollution-reducing equipment (Hong Kong Environment Bureau 2013).
Soil and Water Pollution
Although our discussion will focus mostly on air pollution, as has much of the
research in this area, soil and water pollution deserve some mention. During China’s
rapid urbanization process, many old, dirty firms moved away from the central areas
of large cities; as a result, land contamination has emerged as a new and serious
issue in recent years. A World Bank study estimated that there are over 300,000 total
brownfield parcels in China (Xie and Li 2010). At the same time, high levels of
heavy metal pollution can be found throughout China’s farmlands. It is estimated
that the country loses US$3 billion per year to soil pollution, and that between 40 to
70 percent of China’s soil is already contaminated with heavy metals and toxic fertilizers
(as discussed in Guilford 2013). These facts highlight that a “web of nature”
connects the urban economy to its natural surroundings. If polluting factories leave
the city and relocate in the countryside, urbanites enjoy a reduced direct exposure
to industrial pollution, but they still face the challenge of brownfield remediation
and increased risk of food contamination as dirty industry moves near farmland.
Some recent research has studied water pollution along China’s major rivers.
Kahn, Li, and Zhao (2015) document evidence of higher pollution levels at provincial
Figure 6
PM2.5 in Beijing and Shanghai
Source: The PM2.5 concentration data are obtained from the Data Center of the China’s Ministry of
Environmental Protection (MEP) (http://datacenter.mep.gov.cn/) and US Embassy.
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60
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2008 2009 2010 2011 2012 2013 2014
Beijing–US Embassy
Beijing–MEP
Shanghai–MEP
PM2.5 (μg/m3)
78 Journal of Economic Perspectives
borders. Polluting industries such as pulp and paper mills cluster in these areas such
that the social costs of this type of activity flow downstream. The central government
recognizes the challenge of free riding at political borders (Sigman 2002) and has
introduced regulations to reduce transboundary water pollution levels. Such regulations
have helped to reduce pollution for targeted criteria but did not reduce such
spillovers for nontargeted pollutants, like heavy metals (Kahn, Li, and Zhao 2015).
Costs and Consequences of High Pollution Levels
Elevated pollution levels have a variety of costs. Perhaps most obvious and
severe are the immediate costs to human health. But in addition, pollution reduces
worker productivity, alters real estate values, and affects the local quality of life, and
it has contributed to global environmental concerns like climate change.
The Health Costs of China’s Pollution
Life expectancy trends for China, Japan, and South Korea from 1960 to 2013
are reported in Figure 7. During the 1960s, China’s life expectancy converged with
South Korea’s. At that time, many “barefoot doctors,” trained with basic medical
knowledge, were sent to work in rural areas. That program effectively reduced the
high mortality of newborn infants and the morbidity of contagious diseases. But
then, starting in the late 1980s, the two nation’s life expectancies diverged, and in
recent years South Korea’s life expectancy has converged with Japan’s.
Figure 7
Life Expectancy Trends in Three Asian Nations
Source: The World Bank Data, http://data.worldbank.org.
China
Japan
South Korea
1960 1970 1980 1990 2000 2013
40
50
60
70
80
85
A New Era of Pollution Progress in Urban China? 79
The relatively flat profile for China’s life expectancy during a time of sharp
growth after the 1980s hints that some factor, like rising pollution levels, may be
hindering life expectancy. Ebenstein et al. (2015) use several datasets to document
that China’s growth in life expectancy is less than what would be predicted
given the nation’s per capita income growth. They study the relationship between
income, pollution, and mortality in China from 1991–2012. They document a
positive association between city-level GDP and life expectancy. They also find a
negative association between city-level particulate air pollution exposure and
life expectancy that is driven by elevated cardiorespiratory mortality rates: for
example, a 100 μg/m3 increase in PM10 exposure is associated with a decline in
life expectancy of 1.5 years at birth and 2.3 years at age five. Hanlon and Tian
(2015) use cross-city data in modern China and in late 19th-century England to
study the relationship between polluting industry agglomeration and mortality.
In both settings, there is a positive correlation between heavy industry and death
risk, although modern China’s gradient is less steep than the relationship found in
historical England.
There are other studies on the relationship between air pollution and life
expectancy in China. Chen et al. (2013) find that China’s Huai River policy, which
provides free winter heating via the provision of coal for boilers in cities north of
the Huai River but denies heat to the south, results in about 184 μg/m3 higher
ambient concentrations of total suspended particulates in the north. This pollution
exposure is associated with a reduction in average life expectancy of 5.5 years in the
North, due to an increased incidence of cardiorespiratory mortality.
The health costs of air pollution is also directly reflected in mortality and
morbidity. Aunan and Pan (2004) find that an increase of one μg/m3 in PM10 and
sulfur dioxide will result in a 0.03 and 0.04 percent increase in all-cause mortality,
respectively, along with a 0.07 and 0.19 percent increase in hospital admissions
due to cardiovascular diseases, respectively, while the coefficients for hospital
admissions due to respiratory diseases are 0.12 and 0.15 percent, respectively. The
impact of long-term PM10 levels on the prevalence of chronic respiratory symptoms
and diseases per μg/m3 are a 0.31 percent increase in adults and 0.44 percent
in children.
Such health damages caused by pollution in China have created a substantial
burden for its economy. According to Matus et.al. (2012), the ozone and particulate
matter concentrations beyond background levels have led to a loss of US$16 billion
to US$69 billion in consumption (or 7 to 23 percent) in 2005. In another study,
Kan and Chen (2004) find that the total economic cost of health impacts due to
particulate air pollution in Shanghai in 2001 was approximately $625 million in US
dollars, accounting for 1 percent of the gross domestic product of the city. Wang
and Mauzerall (2006) estimate that the health costs due to year 2000 anthropogenic
emissions in Zaozhuang, a city in eastern China heavily dependent on coal, are 10
percent of that city’s GDP.
The costs imposed by ambient air pollution can be reduced by investing in selfprotection.
Chinese urbanites can choose where to live in a city and what private
80 Journal of Economic Perspectives
self-precautions to take, such as purchasing masks or air filters, and how much time
to spend outside.
These adaptation strategies have increased in importance over time in China. In
the past, China’s domestic passport or hukou system limited the ability of individuals
to vote with their feet and move across cities or from rural to urban areas. Within a
city, firms provided cheap housing close to the workplace to minimize commutes.
Moreover, there was not a strong understanding of how pollution affects health and
productivity, and there were few self-protection products that a concerned susceptible
person could purchase. But in modern urban China, urbanites have at least
some control over their air pollution exposure through location decisions and selfprotection
measures, and the urban wealthy in particular may be able to reduce
their exposure substantially (Kahn and Zheng 2016).
Effects of Pollution on Worker Productivity and Local Growth
In an open system of cities that compete for workers and firms, geographic pollution
hot spots can influence the spatial distribution of firms, workers, real estate prices,
and wages. Hanlon (2016) develops a spatial equilibrium theory incorporating local
pollution effects that can explain how the evolution of city pollution levels, driven by
local industrial growth, can affect overall local economic development. He applies
the theory to study the cities of 19th century Britain, where some cities specialized in
heavy coal-using industries such as iron and steel production, resulting in very high
levels of local pollution. As these industries grew (because of world demand), the
cities that specialized in such dirty industries experienced a rise in local coal use and
hence in local air pollution. Hanlon shows that the increase in local pollution acted
as a substantial drag on local employment growth. Industries in more polluted cities
had to pay higher “combat pay” to attract workers at the same time that the elevated
pollution reduced worker and firm productivity. A study in China also shows that
higher levels of air pollution decrease worker productivity by reducing the number
of calls that workers complete each day at call centers (Chang, Zivin, Gross, and
Neidell 2016).
The spatial equilibrium dynamics described in Hanlon (2016) did not
play out in Mao’s era because of the binding hukou system in China, in which
citizens were designated as living in a certain area and not allowed to move
without official permission. With the de facto relaxation of the hukou system and
the liberalization of the labor and land markets starting in the 1980s, Chinese
urbanites have more choice over where to work and live, both within and across
cities. Given that Beijing is the nation’s capital city, it continues to attract highly
skilled workers and floating workers because its overall bundle of opportunities
and benefits exceeds the disamenity costs of its relatively high local pollution.
Now that China’s cities form an open system, Hanlon’s (2016) model offers
relevant predictions. The major heavy industrial cities Mao established in the
Northeast Region and the “Third Front Region” are now lagging behind because
they feature dirty and declining industries and cannot attract high-skilled clean
industries.
Siqi Zheng and Matthew E. Kahn 81
How Households Seek to Reduce their Pollution Exposure
With the relaxation of the hukou system and the liberalization of the labor and
land markets, people are also able to “vote with their feet.” The theory of compensating
differentials yields insights about the pricing of real estate across cities and the
resulting spatial allocation of different households and firms across China’s cities
(Rosen 1979; Roback 1982). Using standard revealed preference methods, several
studies have documented the rising demand for environmental quality in China’s cities.
In a compensating differentials study (Zheng and Kahn 2008), we find that all
else equal, a 10 microgram per cubic meter increase in PM10 particulate pollution
reduces home prices by 4.1 percent in Beijing. In an intercity study of 35 Chinese
large cities (Zheng, Kahn, and Liu 2010), we find that home prices are lower in
cities with higher ambient pollution levels, and the marginal valuation for green
amenities is rising over time. In Zheng, Cao, Kahn, and Sun (2014a), we exploit
the fact that the particulate matters that are imported into a city depend on the
dominant wind direction and emissions from nearby cities, and the sandstorms
from Inner Mongolia. Using wind and sandstorms as instrumental variables, we find
that on average, a 10 percent decrease in imported neighbor pollution is associated
with a 0.76 percent increase in local home prices. For such cross-city variation
in disamenities
to be capitalized into real estate prices requires that migrants both
are aware of the differences in local public good quality and that such differentials
influence their locational decisions.
Another method that households can use to reduce air pollution exposure is to
purchase masks and air pollution filters. Using a dataset of Internet purchases in 35
Chinese cities, in Sun, Kahn, and Zheng (forthcoming), we document that Chinese
households invest more in masks and air filter products when ambient pollution levels
exceed key alert thresholds. Those with higher incomes are more likely to invest in air
filters, which are much more expensive than masks but also more effective. This finding
suggests that richer people are exposed to less air pollution than poorer people. When
the outdoor air is polluted, people will prefer to drive private cars (rather than walk on
the street), and they will also decrease their time spent outdoors (Neidell 2009). Based
on the estimate in Chen and Zhao (2011), the indoor concentration of particulate
matter is on average about 80 percent of the outdoor concentration in Chinese cities,
so people can breathe less-polluted air when they are indoors on polluted days. Moreeducated
workers are more likely to work in such indoor jobs.
Global Environmental Costs
Although our primary focus here is on costs experienced by Chinese from China’s
pollution, we should mention that China’s contribution to greenhouse gas emissions
is now the largest of any country. We are not aware of a study that puts the Chinaspecific
costs in context. China is now the world’s leading greenhouse gas producer.
However, Muller, Mendelsohn, and Nordhaus (2011) estimate that the global external
damage for US petroleum and coal product manufacturing is 35 percent of the industry’s
value added. Also, China’s pollution has imposed costs on nearby nations such as
South Korea