When local governments are pressured to hit tax revenue targets, industrial pollution in their region significantly increases.
April 1, 2026
Original Paper
Fiscal target pressure, regulatory relaxation, and environmental pollution
SSRN · 6503529
The Takeaway
The study shows that officials facing high fiscal pressure will quietly stop enforcing environmental regulations to ensure local factories keep producing and paying taxes. This creates a direct trade-off where 'fixing the budget' results in immediate ecological degradation.
From the abstract
The industrial sector poses a significant challenge to ecological and environmental development in various countries. This study investigates the effect of the fiscal target pressure (FTP) on enterprises’ pollution emission intensity using enterprise-level data from 2003 to 2013 Chinese Industrial Firms Pollution Emissions Database (CIFPE) and revenue growth targets data in provincial and municipal government work reports. We find that FTP significantly increases enterprises’ pollution emission