China Policy Journal Volume 1, Number 1, Fall 2018 | Page 117

China Policy Journal
conventional monitoring and enforcement
of environmental laws, regulations,
and standards (Foulon, Lanoie,
and Laplante 2002), and because PRD
programs have lower regulatory costs
(Dasgupta, Wang, and Wheeler 2006).
The literature on the effectiveness
of PRD programs is very limited
and falls into two groups. The first
group compares the environmental
performance ratings of firms before and
after a program is implemented and ascribes
any ratings improvements to the
program (Afsah, Laplante, and Wheeler
1997). However, this approach may
be confounded by time-varying factors
such as technology improvements. The
second group compares polluting emissions
from rated and unrated firms and
credit performance improvements by
rated firms to the program. However,
this approach may be confounded by
selection bias (e.g., firms with better environmental
performance may be more
likely to be rated).
It is rare to have pollution data
for both rated and unrated firms before
and after implementation of a PRD program.
Garcia, Sterner, and Afsah (2007)
and Garcia, Afsah, and Sterner (2009)
assessed the effectiveness of Indonesia’s
PROPER using measured pollution
from rated and unrated firms, both ex
ante and ex post. Their 2007 study suggested
that PROPER reduced emissions
intensity, with a particularly rapid and
strong impact on firms that had poor
initial compliance records. Their 2009
study found a strong reactive response
during the first six months of disclosure,
followed by a more moderate, but
still significant, longer-run response as
management adjusts to the new regime.
This study extends PRD assessment
to China, using panel data on
pollution from rated and unrated firms,
before and after implementation of the
Green Watch program in Jiangsu province.
It offers the following two main
contributions to the literature. First, we
exploit the panel structure of the data to
control for confounding factors such as
time-variant technology improvement
and selection bias between rated and
unrated firms. Second, we go beyond a
single measure of environmental performance
by considering the impact of
ratings disclosure on several measures,
including emissions intensity and effluent
concentrations for a variety of air
and water pollutants.
The remainder of the paper is
organized as follows. Section 2 reviews
the relevant literature, focusing on the
role of PRD programs in developing
countries. Section 3 describes China’s
Green Watch program, while Section
4 describes the survey instruments and
provides descriptive statistics for major
variables. Section 5 presents the estimation
model and results, and Section
6 summarizes and concludes the paper.
2. Previous Research
The literature on pollution control
policies consists of extensive
work on command-and-control,
and market-based and information-based
instruments (Dasgupta,
Wang, and Wheeler 2006; Keohane and
Olmstead 2016). Command-and-con-
114