Promotion or Protection? Labor Market Evidence from the Environmental Cadre Evaluation Policy in China

China implemented the environmental cadre evaluation (ECE) policy at the end of 2005, elevating environmental priority to the top tier in the cadre evaluation system. This paper theoretically and empirically examines the labor market effect of the ECE policy in China, with a focus on bureaucratic incentives of promotion and collusion. We find that the ECE policy results in reduced labor demand by inducing resource reallocation from production to abatement activities. Particularly, based on a large firm-level data set from China's manufacturing sector, we estimate that sulfur dioxide (SO2) emissions and labor demand by firms in China's Acid Rain Control Zone and SO2 Pollution Control Zone (TCZ) cities reduce by 17.5% and 3.5% after the implementation of the ECE policy. However, we do not find significant evidence that the ECE policy succeeds in terms of utilizing bureaucrats' promotion incentive to improve the enforcement of relevant environmental policies. Moreover, SO2 emissions and labor demand by firms in TCZ cities are significantly higher after the implementation of the ECE policy if the mayor is collusion-incentivized. Our results imply that more rigorous bureaucratic environmental evaluation and stricter monitoring on bureaucratic collusion should significantly benefit the environment