Did Haze Pollution Harm the Quality of Economic Development?—An Empirical Study Based on China’s PM2.5 Concentrations

Abstract

Based on the PM2.5 haze data of China’s provinces between 2004–2016, this paper systematically explores the impact of haze pollution on the quality of China’s economic development, as well as its transmission mechanisms. This is achieved by measuring the quality of economic development with total factor productivity. Furthermore, this paper innovatively uses precipitation as an instrumental variable for mitigating the endogeneity of the haze pollution variable, by which the impact of haze pollution on the quality of China’s economic development is estimated within the framework of two-stage least squares. It is found that: the haze pollution has degraded the quality of China’s economic development significantly; the labor supply loss, counter urbanization and human capital disruption are the three major transmission channels through which haze pollution affects the quality of China’s economic development; strengthening government’s environmental management is effective in mitigating the adverse impact of haze pollution on the economic development quality; and that China’s unique fiscal decentralization system has exacerbated the negative economic effect of haze pollution. The policy implications of this paper are as follows: Improvement of economic development quality is a prerequisite for the transition of economic development mode; and the governmental management of haze is conducive to enhancing the quality of atmospheric environment and economic development, and to promoting the high-quality development of the Chinese economy.