Principal Moral Hazard, Environmental Regulatory Biases, and Strategic Interaction among Chinese Local Governments
type: CreativeWork
description: Principal moral hazard is one of the major concerns that generates undesired and inefficient governance outcomes. Although the principal moral hazard theory is very well-established, little empirical evidence has been provided on how principal moral hazard is operating in practice and what consequences it brings about. In analyzing environmental enforcement activities of the Chinese central government, this dissertation provides the first systematic examination on principal moral hazard using observational data. The specific findings and contributions of this study are as follows. First, it empirically demonstrates the detrimental effects of principal moral hazard. Chapter 2 shows that under-enforcement by the central government stimulates local governments to give up the race-to-the-top competition, while over-enforcement tends to deter the local actors from participating in the game of race to the bottom (yet has no significant effect on the race-to-the-top activities). The results indicate the importance of setting the right incentives on the efficiency of regulatory competition and reveal the consequences of principal moral hazard. Second, in order to prevent the principal moral hazard from happening, we should better understand the factors that lead to regulatory biases. Chapter 3 shows that political connections between local officials and provincial leaders reduce the probability of overenforcement or increase the probability of underenforcement that cities experience. Put differently, a locality with politically connected officials likely has greater advantages relative to its peers regarding environmental inspection and enforcement activities conducted by the central environmental regulatory agency. Although the specific factors that associated with the biased regulation may vary depending on the research contexts, they all pointed to the potential problems with politically-oriented enforcement. Also, the last empirical chapter examines whether and how envi…
abstract: Principal moral hazard is one of the major concerns that generates undesired and inefficient governance outcomes. Although the principal moral hazard theory is very well-established, little empirical evidence has been provided on how principal moral hazard is operating in practice and what consequences it brings about. In analyzing environmental enforcement activities of the Chinese central government, this dissertation provides the first systematic examination on principal moral hazard using observational data. The specific findings and contributions of this study are as follows. First, it empirically demonstrates the detrimental effects of principal moral hazard. Chapter 2 shows that under-enforcement by the central government stimulates local governments to give up the race-to-the-top competition, while over-enforcement tends to deter the local actors from participating in the game of race to the bottom (yet has no significant effect on the race-to-the-top activities). The results indicate the importance of setting the right incentives on the efficiency of regulatory competition and reveal the consequences of principal moral hazard. Second, in order to prevent the principal moral hazard from happening, we should better understand the factors that lead to regulatory biases. Chapter 3 shows that political connections between local officials and provincial leaders reduce the probability of overenforcement or increase the probability of underenforcement that cities experience. Put differently, a locality with politically connected officials likely has greater advantages relative to its peers regarding environmental inspection and enforcement activities conducted by the central environmental regulatory agency. Although the specific factors that associated with the biased regulation may vary depending on the research contexts, they all pointed to the potential problems with politically-oriented enforcement. Also, the last empirical chapter examines whether and how envi…
author: Chen, Tingjia
language: en
keywords: Chinese politics and policy, environmental governance, policy implementation, principal moral hazard, regulation
date published: 2019
date modified: 2026-07-24T00:55:10Z
provider: University of Arizona
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: The University of Arizona.

PropertyValue
property ID: Handle
value: http://hdl.handle.net/10150/633220