Target‐setting, political incentives, and the tricky trade‐off between economic development and environmental protection

Abstract Disentangling the relationship between economic development and environmental protection has attracted much attention from public administration scholars. While traditionally scholars approach the relationship from either a substitutive or a complementary perspective, we offer a nuanced perspective by examining how the target‐setting on economic growth shapes environmental performance. This article proposes an explanation for the impacts of gross domestic product growth targets on environmental performance based on a yardstick competition model, where the upper‐level governments use relative performance to create competition among lower‐level governments. We argue that a trade‐off exists between economic development and environmental performance; however, the substitutive relationship tends to transit to a complementary relationship when environmental performance is incorporated into the cadre evaluation system. Analyzing a panel dataset of economic targets and PM2.5 air pollution across Chinese cities from 2001 to 2010, we confirm the relationship between economic targets and environmental performance by highlighting local leaders' political incentives.