Surprising Policy Serendipity: How Does the Development of Gaming Industry Address Sustainability?

Policies sometimes surprise policymakers with unintended consequences. In this research, we study how the issuance of video game licenses in China affects local air pollution, creating positive spillover effects in different policy areas. While the video game industry in China has rapidly grown, the Chinese government has been primarily concerned about its negative impact; thus, it has long since strictly regulated the issuance of licenses for new games (NGLs). By examining city-level data and NGL approvals from 2009 to 2018, we demonstrate that a 1% increase in NGLs could reduce city PM2.5 by 2.1%. Such positive spillover was found to be achieved via two distinct channels. At the macro-level, the development of new video games is likely to crowd out the secondary industry by attracting capital and employees to the gaming-related industry. By incorporating individual-level information into our analysis, we further show that NGLs facilitated cultural shifts by enhancing the homebody economy. Moreover, by leveraging the recent policy support for e-sports as a natural experiment, we are able to overcome the effect of endogeneity on the results. Overall, this study offers new evidence on the possible unintended yet favorable outcomes that policymakers may overlook during policy design.