Rewriting the Contract: How Bureaucratic Incentives Ended China’s Race-to-the-Bottom

This study examines the impact of integration of environmental considerations into the political evaluations on the race-to-the-bottom competition in the land market. By analyzing over 250,000 industrial land transactions from 279 cities between 2007 and 2018, we find that local officials frequently reduced land prices to attract investment, particularly in regions with intense economic competition and when facing major political reviews. Our difference-in-differences analysis reveals that the introduction of environmental protection as a criterion in the cadre evaluation system in 2013 significantly mitigated the race-to-the-bottom competition in land conveyancing. Moreover, heightened environmental monitoring pressures have led local officials to be less inclined to sell industrial land at lower prices. This study contributes to the understanding of how political incentives and environmental policies interact to influence local officials’ resource allocation decisions, with implications for both environmental quality and economic performance. Our findings suggest that integrating environmental considerations into political evaluations can effectively reduce the race-to-the-bottom competition among local officials and promote sustainable development.