The impact of economic and financial activities on air quality: a Chinese city perspective

Abstract

This study examines the impact of economic and financial activities on air pollution in China using prefecture-level panel data from 2004 to 2015. Recruiting the air quality index (AQI) as a measure of overall air quality in Chinese cities, we find that industrial production, financial development, and economic integration lead to higher overall air pollution. Nevertheless, efficiency in urban planning through public transportation and population density alleviates this environmental degradation. A closer look into the two main air pollutants in China, sulphur dioxide and dust, further highlights the complexity of the issue. We find that trade openness reduces both sulphur dioxide and dust emissions, whereas financial development reduces sulphur dioxide emissions but increases dust in Chinese cities. Our findings are of particular interest to policymakers when devising environmental policies in support of sustainable economic development.