Moving to Opportunity for Polluting : Intra-City Evidence from China’s Land Market

As a response to local environmental regulations, it is prevalent to observe the relocations of polluting firms across cities. We provide the first piece of evidence of the within-city relocations of polluting plants through the spatial distribution of industrial land. We use the unique setting of the 12th Five-Year Plan on Air Pollution Prevention and Control covering 117 cities in China, among which the 47 treatment cities received more stringent regulation than the remaining 70. Using a triple-difference model, we find that after the implementation of the regulation, the locations of land newly leased by firms in polluting industries in the treatment cities are further away from the monitoring stations than those in the control cities. The event study results and the placebo tests using other categories of land farther validate the causal relationship. The channel analysis suggests that the mechanism is through both the supply side and the demand side: the local governments move their industrial land supply away from the monitoring stations after the regulation; land buyers also show less of a tendency to bid for land near the monitoring stations