The role of place-based policies on carbon emission: A quasi-natural experiment from China’s old revolutionary development program

Abstract

The effectiveness of place-based policies on carbon emission is controversial, and particularly the mechanism behind its effectiveness is unknown. We treat China’s Old Revolutionary Development Program (ORDP)— a large-scale and novel type of place-based policy targeted at undeveloped regions, as a natural experiment to estimate ORDP’s impact on carbon emission. Employing the panel data of 110 prefecture-level cities in China from 2010 to 2019, we perform a time-varying difference-in-differences (DID) study and discover that ORDP leads to an average of 26.7% increase in carbon emission and this effect takes a period to emerge and is not sustainable in the long term. Three mechanisms that may result in such impact are that ORDP improves economic development, changes industrial structure, and decreases technological progress. Further heterogeneity analysis indicates that ORDP results in a greater increased impact on carbon emission in old revolutionary cities that are located in western China compared to those located in central and eastern China.

Keywords

• Place-based policies
• Carbon emission
• China’s old revolutionary development program
• Difference-in-difference method