Centralization and border water pollution: Evidence from China's environmental enforcement reform

Recent literature indicates that environmental decentralization leads to a "race-to-the-bottom" and lax environmental regulations, resulting in severe border water pollution. Therefore, the Chinese central government launched the Environmental Comprehensive Administrative Enforcement Reform (ECAER) in 2018, characterized by the centralization of power and functions. However, the exact impact of ECAER on border water quality remains unclear. Utilizing the exogenous shock from ECAER and surface water quality data between July 2018 and December 2020, this study identifies the causal relationship between ECAER and border water quality. Using the staggered difference-in-differences approach, this study found that environmental centralization leads to a significant deterioration in border water quality. This influence is more prominent in regions with lower river classes and better historical water quality. Further analysis revealed that the deterioration in border water quality was mainly centered around the downstream stations, with no significant change in the upstream stations of the administrative boundary. This implies that local governments strategically respond to environmental centralization by polluting their neighbors. However, public attention to water pollution issues could mitigate the border water pollution effect of environmental centralization. This study provides valuable insight into the long-standing debate on the effectiveness of environmental (de)centralization and has policy implications for global water pollution control.