Are stronger environmental regulations effective in practice? The case of Chinaʹs accession to the WTO

This paper investigates the effects of environmental policy on environmental conditions resulting from Chinaʹs accession to the WTO. We estimate environmental technological efficiency under both weak and strong disposability assumptions and use the difference to calculate the pollution abatement cost (PAC). We then undertake Tobit regression analysis on several explanatory variables, including dummies for different time periods and regions. Generally, our findings show that Chinaʹs accession to the WTO did not guarantee better environmental conditions even though China adopted stronger regulations to meet the higher standards. In particular, the eastern region does not seem to be strictly regulated. These interesting results may be partly attributable to Chinaʹs need to attract foreign investment and may represent a case in which institutional regulations are not always effective in practice.