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China's fiscal decentralization and environmental quality: theory and an empirical study

Published online by Cambridge University Press:  02 September 2019

Yu Hao Open the ORCID record for Yu Hao [Opens in a new window] ,
Yu-Fu Chen ,
Hua Liao  and
Yi-Ming Wei
Yu Hao*
Affiliation:
Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, China School of Management and Economics, Beijing Institute of Technology, Beijing, China Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, China Sustainable Development Research Institute for Economy and Society of Beijing, Beijing, China Beijing Key Lab of Energy Economics and Environmental Management, Beijing, China
Yu-Fu Chen
Affiliation:
Economic Studies, School of Business, University of Dundee, Dundee, United Kingdom
Hua Liao
Affiliation:
Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, China School of Management and Economics, Beijing Institute of Technology, Beijing, China Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, China Sustainable Development Research Institute for Economy and Society of Beijing, Beijing, China Beijing Key Lab of Energy Economics and Environmental Management, Beijing, China
Yi-Ming Wei
Affiliation:
Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, China School of Management and Economics, Beijing Institute of Technology, Beijing, China Collaborative Innovation Center of Electric Vehicles in Beijing, Beijing, China Sustainable Development Research Institute for Economy and Society of Beijing, Beijing, China Beijing Key Lab of Energy Economics and Environmental Management, Beijing, China
*
*Corresponding author. E-mail: [email protected], [email protected]
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Abstract

As a wide-reaching institutional reform, China's fiscal decentralization was launched in the early 1980s to encourage provincial economic growth by granting more financial autonomy to provincial governments. In this paper, the impact of fiscal decentralization on China's environmental quality is investigated both theoretically and empirically. A neoclassical model is developed based on the primary characteristics of China's fiscal decentralization. Using provincial panel data for the period 1995-2015, a two-equation regression model is employed to empirically verify the three propositions of the theoretical model: (1) there exists an inverted-U shaped relationship between fiscal decentralization and GDP per capita; (2) fiscal decentralization is positively related to GDP per capita at the steady state; (3) there is an inverted-U shaped Environmental Kuznets Curve relationship between pollution emissions and economic growth.

Keywords

Chinaeconomic growthenvironmental qualityfiscal decentralizationpanel data

JEL classification

Q54: Climate • Natural Disasters and Their Management • Global Warming Q56: Environment and Development • Environment and Trade • Sustainability • Environmental Accounts and Accounting • Environmental Equity • Population Growth E60: General Q53: Air Pollution • Water Pollution • Noise • Hazardous Waste • Solid Waste • Recycling
Type
Research Article
Information
Environment and Development Economics , Volume 25 , Issue 2 , April 2020 , pp. 159 - 181
Copyright
Copyright © Cambridge University Press 2019

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Footnotes

†

These authors contributed equally to this study and share first authorship.

When originally published, this article contained errors with the author names in the Cite this article section. A correction notice has been published and the error rectified in the PDF and HTML.

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