Information Asymmetry, Action Of Participant And Effectiveness Of Environmental Regulation

With the deepening of China's industrialization process,environmental problems accumulated for a long time begin to break out frequently.Environmental regulation in China has been carrying out for almost 30 years,however,environmental status as a whole seems to be worse.Study on the effectiveness of environmental regulation appears to be in urgent need.This paper studied industrial pollutions from firms,and mainly aimed to research the factors and their interactions for the effectiveness of environmental regulation. Based on the analytical framework of information asymmetry,action of participants and the effectiveness of environmental regulation,theoretical analysis and empirical study were carried on from two aspects both information asymmetry and action of participants such as firms,government,public.In the theoretical analysis,the paper incorporated information asymmetry and action of participant,applied analytical instruments including game theory,graphs and tables,comparison to the whole analytical process.Firstly,it pointed out that low environmental violation cost and information asymmetry between environmental regulator and the regulated are root causes for environmental opportunism.Within its capability,environmental dicision of firm is subjected to opportunity scope created by information asymmetry rather than cost of effluent abatement.Information asymmetry has reversible effects.Besides its negative side,government could exploit its positive effect through reputation mechanism and its spillover effects.Namely,to spur firms to comply or even over-comply environmental regulation.Secondly,effectiveness of environmental institution,regulation enforcement,and environmental investment are important to improve the effectiveness of environmental regulation.Especially, monitoring ability of environmental administration system,strictness of environmental regulation and investment on environmental infrastructure are most important.Finally,the paper assumed that the public could play a role of supervision on government and firms but the effect seems feeble.And currently,the weakness of public supervision is a significant characteristic in China.In the empirical study,basically all the hypotheses or assumptions from theoretical analysis were tested.Panel data sample covered 29 provinces or cities of China during 1997-2006,and series data were within range of 1990-2006. Econometric analysis through Eviews5.1 found that:(1) Information asymmetry indeed has a significant negative influence on the effectiveness of environmental regulation.Probability of environmental opportunism has a negative relationship with the degree of information asymmetry of regulator and the cost of environmental violation.Actually,Harrington Paradox doesn't exist in China.(2) Ability of supervision,environmental infrastructure investment,and vigorously environmental regulation from government has a significant positive relationship with the effectiveness of environmental regulation.In addition,there is a time-lag effect of regulation just as Baumol and Klevorick proposed.Specifically,there was a time lag about 1 year for the effect of environmental regulation on firms,6 years for environmental infrastructure investment,and 5 years for the strictness of environmental regulation.(3) As for firms,the money input and equipment applied for pollution abatement have a positive relationship with effectiveness of environmental regulation,and there is an A-J effect for environmental investment in China.(4) Results also showed that action of the public or government would be affected by environment status.(5) Effects exist but seem weak for public supervision on government and firms,and there is a time lag about 3 years.In the end,some suggestions were put forward to enhance the effectiveness of environmental regulation in China.