Essays in environmental economics and policy (China)

This dissertation presents three essays in environmental economics and policy. The first paper incorporates an output tax, a fuel tax, and a combination of fuel tax and process tax into a general equilibrium model of the Chinese economy. The tax rates are set proportionally according to dose response estimates and economic evaluation of health damages of key harmful air pollutants to the Chinese people. The results show that imposing modest revenue neutral corrective taxes increases economic growth in the long run, reduces health damages, and achieves substantial carbon emission reductions.; The second paper investigates the factors that are driving the variation in environmental performance in Chinese cities. I construct a model of the revealed preferences of local governments, and empirically test the impacts of the pressures confronted by local governments. I find that annual average income has a positive and significant impact on investment in pollution treatment and effluent standard compliance. Local environmental performance is negatively affected by the severity of other development issues, such as basic education and unemployment. The indicator for both public pressure and upper government attention---the number of complaints and visits to government offices by local residents recorded at the provincial level---has a positive and significant impact on effluent standard compliance.; The third paper uses a nested logit model to examine whether potential pollution abatement cost savings adjusted by institutional and socio-economic conditions influence the location choices of foreign direct investment (FDI) in Chinese provinces. It complements the existing literature by incorporating firm characteristics instead of looking at only choice attributes. The results show that (i) FDI firms in polluting industries tend to locate in provinces with higher potential abatement costs savings adjusted by local environmental regulations; (ii) relatively dirtier firms are more likely to locate in less developed provinces or provinces with fewer similar polluting industries; (iii) firms in pollution-intensive industries are more sensitive to regulations and development status than firms in non-polluting industries; and (iv) firms tend to locate in provinces where they have more bargaining power with the local governments. These findings suggest the existence of domestic pollution havens in China.