Political Patronage, Rent-Extraction, and Social Costs: Evidence from China’s Environmental Cleanup

This research examines the interplay of political patronage, environmental regulation, and business dynamics in China’s governance. We reveal that local leaders’ patronage ties shield polluting firms from regulations, resulting in adverse environmental consequences. Additionally, we demonstrate that the rent-seeking behavior of politically connected officials frequently supersedes their motivations for economic growth and fiscal revenue. Further analysis shows the political patronage brings only industrial expansion of local polluters, without corresponding gains in productivity or profitability. And ultimately, it leads to the deterioration of the local business environment. Our findings extend beyond formal institutions, highlighting the impact of local leaders' informal networks on local environmental governance, as well as regional business environments and economic growth. These insights have broad implications for regulatory dynamics in autocratic and democratic contexts, emphasizing the role of power and influence.