Environmental and Regional Economic Development Policy : Evidence from the Rise of Central China Program

Although policies that target underperforming regions are widely used by governments to reduce poverty, little effort has been made to evaluate the environmental consequences of such policies. This paper examines the unintended environmental effects of a prominent regional economic development policy - the Rise of Central China program - using a boundary discontinuity design and a difference-in-difference-in-differences approach. We find that water-polluting production activities in program-targeted central regions grow much faster than less water-polluting activities relative to non-targeted eastern regions. Since the targeted regions are located upstream of the three major rivers in China, poorer residents in Central China and a larger proportion of the main river basins are exposed to harmful water pollution ex post the policy.