Does vertical supervision promote regional green transformation? Evidence from Central Environmental Protection Inspection

Vertical supervision is an important institutional arrangement designed to overcome the challenges of environmental governance and promotion of green development in the region. Based on the panel data of 278 cities in China from 2010 to 2018, we use Central Environmental Protection Inspection (CEPI) as an exogenous policy and the multi-period Difference-in-Differences method to test the role of vertical supervision in promoting regional green transformation. Our findings indicate that CEPI, a typical vertical supervision policy, effectively promotes green transformation regionally by reducing local pollution emissions and improving total factor productivity. The analysis of mechanism shows that local governments mainly promote regional green transformation by increasing the investment in pollutant governance, research and development in green technologies, and updating fixed assets. Our study provides a valuable reference for the implementation of vertical supervision policies and effective governance of local governments by the central government.