Corruption,Shadow Economy And Environmental Pollution

China has experienced more than three decades of rapid growth,but suffers from severe environmental degradation.People's life is filled with pollution haze,water pollution and so on.According to the report of Climate Change Performance Index 2016 published by German Watch,China has got a bad grade in the five evaluation grade.In the rank of Environmental Performance Index,China is around 118th which is nearly to the bottom in 178 countries.As the environmental quality is closely linked with people's life,the government enacts a set of environmental policy for expected to improve environment.Firms are the main controlled objects and the correlative research on policy-effectiveness also focus on firm's level.As a matter of fact,there are lots of influence factors and it may be hard to success if only based on firm's level.From the angle of policy makers and implementers,corruption is very important for the policy-effectiveness.China is suffering from serious corruption at present and a spate of corruption scandals involve various society fields,especially environmental area.Some stuties imply that corruption may affect environment through different ways,one of which is in connection with the shadow economy.In consideration of the elusive and unobservability of the corruption and shadow economy,the effect of them on environment may be larger.According to the existing research,corruption and shadow economy could influence the policy-effectiveness and corruption may associate with shadow economy by itself.In hence,it's necessary to analyze the influence mechanism among the corruption,shadow economy and environment.First,this paper estimates the size of shadow economy of 30 provinces of China(except for Xizang)from 1998 to 2014 through MIMIC model.Then,the paper establishes a theoretical framework of the relationship between corruption,the shadow economy and environmental pollution.Followed,according to the theoretical analysis,it estimates the regression model with interacting variables by using the fixed effects model with the panel data of 30 provinces of China during the period from 1998 to 2014.At last,this paper makes six relative suggestions in the view of empirical results.This paper reveals that:(1)the average size of shadow economy in China from 1998 to 2014 is about 10.38%-15.59%and it presents slow rise trend.(2)higher level of corruption may increase environmental pollution.(3)shadow economy in China is positive with environmental pollution,and the expansion of shadow economy will deteriorate the pollution.(4)the effect of corruption on pollution will weaken by the shadow economy,that is,due to the exist of shadow economy,deterioration of corruption to environment will be reduced.