Can technology solve the principal-agent problem? Evidence from China’s war on air pollution

Greenstone, Michael, He, Guojun, Jia, Ruixue and Liu, Tong (2022) Can technology solve the principal-agent problem? Evidence from China’s war on air pollution. American Economic Review: Insights, 4 (1). 54 - 70. ISSN 2640-2068

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Abstract

We examine the introduction of automatic air pollution monitoring to counter suspected tampering at the local level, a central feature of China’s “war on pollution.” Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find an immediate and lasting increase of 35 percent in reported PM10 concentrations post-automation. Moreover, automation’s introduction increased online searches for face masks and air filters, which are strong predictors of purchases. Overall, our findings suggest that the biased and imperfect information prior to automation led to suboptimal investments in defensive measures, plausibly imposing meaningful welfare costs.

Item Type:	Article
Official URL:	https://www.aeaweb.org/journals/aeri
Additional Information:	© 2022 American Economic Association. All rights reserved.
Divisions:	Management
Subjects:	H Social Sciences > HC Economic History and Conditions G Geography. Anthropology. Recreation > GE Environmental Sciences
JEL classification:	D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture; Natural Resources; Energy; Environment; Other Primary Products P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P28 - Natural Resources; Energy; Environment Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy
Date Deposited:	27 Aug 2024 10:51
Last Modified:	24 Sep 2024 17:48
URI:	http://eprints.lse.ac.uk/id/eprint/124670

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