China's regional sustainability and diversified resource allocation: DEA environmental assessment on economic development and air pollution

Environmental protection, including the prevention of air pollution and health hazard materials such as PM2.5 and PM10, is now a very serious policy issue in China after attaining the rapid economic growth and development. The PM stands for “Particular Matter”, indicating the size of both solid particles and liquid droplets found in air. Unfortunately, the economic development has produced a serious healthcare problem in not only China and other surrounding nations. To enhance people's healthcare and appeal a good national image to the world, China is recently looking for the new industrial and environmental policy direction to attain social sustainability in terms of economic development and environmental prevention. To discuss policy implications on the new policy direction, this study utilizes Data Envelopment Analysis (DEA) for assessment on its regional performance by incorporating PM2.5 and PM10 as undesirable outputs, along with two disposability concepts (i.e. natural disposability and managerial disposability). No previous DEA study has incorporated the amount of PM2.5 and PM10 in empirical investigation. Using a simulated data set for the period of 2013-2014, this study measures the efficiency of municipality cities under four different types of regional classifications. The empirical results indicate that the Chinese government should distribute its economic resources to cities, which locate in the northwest region (including Lanzhou, Xining, Yinchuan and Urumqi), and reinforce more strict regulation on energy consumptions for environmental prevention in major cities (e.g. Beijing, Tianjin, Shanghai and Chongqing). The industrial policy change from the economic growth to the environment protection is essential for the future of China, which is currently the second largest economic power in the world. The environmental protection can enhance the China's image of contributing in economics, industry and environmental protection to all other nations. It can be envisioned that the new policy effort reduces the regional imbalance and increases the social sustainability in China. The empirical findings and policy implications discussed in this study are applicable to not only China but also other industrial and developing nations and those are useful in guiding their industrial and environmental policy development.