Promotion or protection? Labor market evidence from the environmental cadre evaluation policy in China.

This paper investigates the impact of China's environmental cadre evaluation (ECE) policy on the labor market within the manufacturing sector. By elevating environmental priorities to the top tier in the cadre evaluation system, the ECE policy aimed to enhance environmental regulations. We focus on understanding how bureaucratic incentives for promotion and collusion shape the labor market effects of this policy. Our analyses suggest that the ECE policy leads to a reduction in employment by reallocating resources from production to abatement activities. Specifically, using firm-level data from China's manufacturing sector, we estimate a 16.6% decrease in sulfur dioxide (SO2) emissions and a 3.3% decline in employment in cities within Acid Rain Control Zone and SO2 Pollution Control Zone (TCZ) areas following the policy's implementation. However, we find no substantial evidence indicating that the ECE policy effectively utilizes bureaucratic promotion incentives to bolster the enforcement of relevant environmental policies. Furthermore, our results indicate that in TCZ cities where mayors are incentivized to collude, both SO2 emissions and employment are notably higher following the implementation of the ECE policy. These findings underscore the importance of adopting stricter bureaucratic environmental evaluations and enhancing monitoring mechanisms to curb bureaucratic collusion, which could significantly improve environmental outcomes.