Do They Ever Give Anything for Nothing? Environmental and Economic Impacts of the State-Led Pairing Aid Targeting Xinjiang, China

Governments’ opportunistic behaviors and failure to recognize local needs and characteristics are the main concerns about place-based policy. In China’s between-region pairing aid program targeting Xinjiang, instead of simple fiscal transfers and centralized decisions about how to perform the aid, state-owned enterprises’ participation and direct cooperation between the aid-giving and -receiving parties was enabled. We propose that these arrangements make this program succeed in curbing general concerns about place-based policy and boost the economy in recipient areas; however, it could hurt the local environment since it might has created a “pollution heaven” here. Based on city-level data from 72 western ethnic cities in China and a difference-in-differences approach, we show that the Program led to significant increases in the local GDP and PM2.5 concentrations, which came along with expansion in the local industrial sector, especially for polluting industries. This paper is of relevance to several long-term topics in place-based policy research and has policy implications both locally and internationally