China Policy Journal Volume 1, Number 1, Fall 2018 | Page 77

China Policy Journal
the transboundary section of the river.
We therefore believe that it is better to
use the estimation result of model “hypothesis
3” to establish the payment
standard since the cross-term used in
this model, degree_upper×, can be considered
a proxy for the water quality in
the section of the river flowing through
the boundary between city j and its direct
upstream neighbor k, where is the
distance between city k and its direct
upstream neighbor j along the river.
This term implies the notion of “distance
decay” of the river water pollution
concentration because of the auto-purification
capacity of the river; that is, the
further the city j is from its upstream
neighbor k, the more the auto-purification
function of the river can help to reduce
the concentration of the pollution
in the section of the river flowing into
the city k. Therefore, the further city k
is from city j, the lower will be the impact
of its transboundary pollution on
city j. Our choice was supported by the
LR test, which confirmed that the use of
the cross-term degree_upper× gave significantly
better estimation results than
the simple term degree_upper and by
the improved statistical significance of
the coefficients for the upstream water
quality related term.
Table 3. Main Estimation Results of He, Huang, and Xu (2015), MBDC Version Data
Hypothesis 1 Hypothesis 2 Hypothesis 3
Individual characteristics
Bid price —0.011 —0.011 —0.011
(38.13)*** (38.13)*** (38.13)***
rep_gov —18.436 —18.666 —18.159
(2.19)** (2.22)** (2.17)**
water_problem 7.080 9.700 10.930
(0.95) (1.29) (1.46)
will_service 15.093 13.791 13.203
(3.87)*** (3.51)*** (3.37)***
quality_deg 20.245 20.217 18.151
(2.67)*** (2.68)*** (2.41)**
age —0.271 —0.177 —0.178
(0.79) (0.51) (0.52)
—0.554 —0.614 —0.534
education
(0.46) (0.51) (0.44)
income_level 4.019 3.825 3.988
(3.96)*** (3.76)*** (3.95)***
74