When incentives change: Career considerations, pollution control, and employment outcomes

Abstract

This study examines how career concerns influence industrial firms’ pollution emissions and employment. We provide compelling evidence that the new promotion evaluation system (NPES) effectively reduces SO2 emissions but also significantly decreases corporate employment. More specifically, a 1% reduction in SO2 emissions driven by the NPES corresponds to an approximately 0.1% decrease in corporate employment, which is lower than the estimates found in existing studies on environmental regulations. We further find that the decline in corporate employment is primarily driven by reductions in output and the intensive margin of pollution generation. Notably, young bureaucrats tend to prioritize securing employment over reducing emissions under the NPES. Furthermore, we observe that the NPES also alleviates regional inequality in SO2-emission abatement.