Air pollution

Linguistics

Perfect information

Engineering

Philosophy

Ecology

Biology

Automation

Statistics

Pollution

Microeconomics

China

Economics

Market economy

Spanish Civil War

Regression discontinuity design

Mechanical engineering

Organic chemistry

Mathematics

Political science

Econometrics

Welfare

Imperfect

Chemistry

American Economic Review Insights

We examine the introduction of automatic air pollution monitoring to counter suspected tampering at the local level, a central feature of China’s “war on pollution.” Exploiting 654 regression discontinuity designs based on city-level variation in the day that monitoring was automated, we find an immediate and lasting increase of 35 percent in reported PM 10 concentrations post-automation. Moreover, automation’s introduction increased online searches for face masks and air filters, which are strong predictors of purchases. Overall, our findings suggest that the biased and imperfect information prior to automation led to suboptimal investments in defensive measures, plausibly imposing meaningful welfare costs. (JEL D82, O13, P28, Q53, Q55, Q58)

Can Technology Solve the Principal-Agent Problem? Evidence from China’s War on Air Pollution