Target‐setting, political incentives, and the tricky trade‐off between economic development and environmental protection
| Published date | 01 December 2022 |
| Author | Juan Du,Hongtao Yi |
| Date | 01 December 2022 |
| DOI | http://doi.org/10.1111/padm.12768 |
ORIGINAL ARTICLE
Target-setting, political incentives, and the tricky
trade-off between economic development
and environmental protection
Juan Du
1
| Hongtao Yi
2
1
School of Public Policy and Management,
Tsinghua University, Beijing, China
2
John Glenn College of Public Affairs, The
Ohio State University, Columbus, Ohio, USA
Correspondence
Hongtao Yi, John Glenn College of Public
Affairs, The Ohio State University, Columbus,
OH 43210, USA.
Email: yi.201@osu.edu
Abstract
Disentangling the relationship between economic develop-
ment and environmental protection has attracted much
attention from public administration scholars. While tradi-
tionally scholars approach the relationship from either a
substitutive or a complementary perspective, we offer a
nuanced perspective by examining how the target-setting
on economic growth shapes environmental performance.
This article proposes an explanation for the impacts of gross
domestic product growth targets on environmental perfor-
mance based on a yardstick competition model, where the
upper-level governments use relative performance to create
competition among lower-level governments. We argue
that a trade-off exists between economic development and
environmental performance; however, the substitutive rela-
tionship tends to transit to a complementary relationship
when environmental performance is incorporated into the
cadre evaluation system. Analyzing a panel dataset of eco-
nomic targets and PM2.5 air pollution across Chinese cities
from 2001 to 2010, we confirm the relationship between
economic targets and environmental performance by
highlighting local leaders' political incentives.
1|INTRODUCTION
How does economic growth shape environmental performance? In the public administration literature, scholars have
long been engaged in seeking answers to this question. While traditionally it was argued that economic development
is typically achieved at the expense of environmental degradation (Stern et al., 1996), recent literature suggests that
Received: 30 December 2020 Revised: 10 July 2021 Accepted: 11 July 2021
DOI: 10.1111/padm.12768
Public Admin. 2022;100:923–941. wileyonlinelibrary.com/journal/padm © 2021 John Wiley & Sons Ltd. 923
these two could possibly go hand in hand under the new philosophy of green economic development (Feiock &
Stream, 2001). Today, many economies are experiencing green transformation under the global pressure for low-
carbon development. Policy and management innovations to stimulate economic development and environmental
protection are increasingly popular at various levels of government (Krause, 2011; Portney, 2003) and in different
national contexts (Krause et al., 2019; van der Kamp et al., 2017). As most of the extant literature regarding the com-
plementary versus substitutive relationships between economic development and environmental protection are from
the United States (US), we know relatively little about how this thesis performs in other national contexts, particu-
larly in authoritarian regimes. With its practice of target-setting as a managerial tool in implementing economic and
environmental policies, China presents a unique case for examining the relationship between economic development
and environmental protection. How does the management of economic development targets affect environmental
performance? Do we observe similar trends in the convergence of economic growth and environmental protection,
as observed in the United States and many other western countries? If so, what are the political and administrative
dynamics shaping the emergence of such trends?
To answer the above questions, we examine the influence of target-setting of economic development on
environmental performance in China. It is especially intriguing to consider these research questions in the context
of China. Different countries have their own ways to tackle the economy-environment trade-off. In democratic
countries, governments prefer to rely on market mechanisms rather than on top-down planning to stimulate eco-
nomic growth and protect the environment (Feiock & Stream, 2001; Krause et al., 2019). In an authoritarian sys-
tem, state intervention and target-setting still serve a crucial role in economic growth and environmental
protection (Ma, 2016; Zhang, 2021). Although China has continued to transition out of a planned economy, the
target-based approach inevitably shapes the behaviors of local governments and leads to certain environmental
outcomes. China has been the second largest economy in the world since 2010, but its economic success comes
at the cost of environmental pollution. The Chinese state planning model presents a representative case through
which to examine and understand the dynamics of economic development and environmental protection in
authoritarian contexts.
The effectiveness of target-setting relies on appropriate incentive design and cadre evaluation. The design of
incentive schemes for government officials has played a pivotal role in China's rapid economic takeoff and progress
in environmental quality (Carter & Mol, 2013; Li & Zhou, 2005). In China, the central government often uses relative
performance evaluation, such as political yardstick competition (Maskin et al., 2000) and tournament competition
(Chen et al., 2005) to motivate local government agents to enhance economic performance. Scholars also argue that
relative performance evaluation of officials rather than absolute performance evaluation reduces information asym-
metry in a political principal-agent relationship, optimizes the incentive mechanism for local officials (Liang &
Langbein, 2015), and enhances performance feedback (Tang et al., 2018), thus improving the environmental perfor-
mance. However, the literature generally uses absolute levels of economic growth, fiscal decentralization, or invest-
ment to quantify economic performance (He, 2015; Lee & Oh, 2015; Yu et al., 2016). Less is known about the
environmental impact of the targets and incentives during China's economic development and transition.
We propose a yardstick competition model based on relative economic growth targets, which helps understand
the relationship between economic development and environmental governance under an authoritarian context. The
yardstick competition model refers to the process, through which upper-level leaders evaluate lower-level govern-
ment leaders based on relative economic performance, which incentivizes lower-level leaders to compete with each
other (Besley & Case, 1995; Maskin et al., 2000). Specifically, we assess the effects of relative economic growth tar-
gets between prefecture-level cities and provincial governments on environmental performance across cities in
China. To gain an advantage in the gross domestic product (GDP) competition, lower-level government leaders tend
to, although not always, set radical economic growth targets that meet or exceed the target of the upper-level gov-
ernment. The higher a lower-level government's economic growth target is than the higher-level government target,
the more likely they are to relax environmental regulations or to invest in shortsighted economic development strat-
egies that cause environmental pollution. Furthermore, we argue that environmental targets embedded in the cadre
924 DU AND YI
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