Skip to main content
SpringerLink
Log in

Fiscal decentralization, government environmental preference, and regional environmental governance efficiency: evidence from China

  • Original Paper
  • Published:
The Annals of Regional Science Aims and scope Submit manuscript

Abstract

The purpose of this study is to discuss the direct and indirect effects of fiscal decentralization on environmental governance efficiency (hereafter referred to as EGE). We first put forward hypotheses by using a theoretical framework. Subsequently, we conduct an empirical investigation by using panel data of 30 Chinese provinces over the period 2003–2015. A province-level dataset is used to measure EGE, and new indices are regressed on fiscal decentralization. Results demonstrate that fiscal decentralization has a significant negative effect on EGE and government environmental preference has a mediating effect on the relationship between fiscal decentralization and EGE. The results obtained are robust when different methods are used. A further investigation of heterogeneous responses to policy changes across regions demonstrates that the effect of fiscal decentralization on EGE presents evident regional heterogeneity.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. The coastal areas are constituted by 11 regions, including the Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, and Hainan. The inland areas consist of 19 regions: Shanxi, Inner Mongolia, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Qinghai, Ningxia, and Xinjiang.

References

  • Adam A, Delis MD, Kammas P (2014) Fiscal decentralization and public sector efficiency: evidence from OECD countries. Econ Gov 15(1):17–49

    Article  Google Scholar 

  • Afonso A, Schuknecht L, Tanzi V (2005) Public sector efficiency: an international comparison. Public Choice 123(3–4):321–347

    Article  Google Scholar 

  • Akai N, Sakata M (2002) Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States. J Urban Econ 52(1):93–108

    Article  Google Scholar 

  • Bahl R, Linn JF (1992) Urban public finance in developing countries. Oxford University Press, New York

    Google Scholar 

  • Baron RM, Kenny DA (1986) The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations. J Pers Soc Psychol 51(6):1173–1182

    Article  Google Scholar 

  • Besley T, Case A (1995) Incumbent behavior: vote-seeking, tax-setting, and yardstick competition. Am Econ Rev 85(1):25–45

    Google Scholar 

  • Besley T, Smart M (2007) Fiscal restraints and voter welfare. J Public Econ 91(3–4):755–773

    Article  Google Scholar 

  • Blanchard O, Shleifer A (2001) Federalism with and without political centralization: China versus Russia. IMF Staff Pap 48(1):171–179

    Google Scholar 

  • Chen S (2015) Environmental pollution emissions, regional productivity growth and ecological economic development in China. China Econ Rev 35:171–182

    Article  Google Scholar 

  • Coelli T, Rao DSP, O’Donnell CC, Battese GE (2005) An introduction to efficiency and productivity analysis. Springer, New York

    Google Scholar 

  • Davoodi H, Zou HF (1998) Fiscal decentralization and economic growth: a cross-country study. J Urban Econ 43(2):244–257

    Article  Google Scholar 

  • Du J, Fang H, Jin X (2014) The “growth-first strategy” and the imbalance between consumption and investment in China. China Econ Rev 31:441–458

    Article  Google Scholar 

  • Ebel RD, Yilmaz S (2002) On the measurement and impact of fiscal decentralization. World Bank, policy research working paper, no. 2809

  • Elhorst JP (2010) Spatial panel data models. In: Fischer MM, Getis A (eds) Handbook of applied spatial analysis. Springer, New York

    Google Scholar 

  • Florax RJGM, Folmer H, Rey SJ (2003) Specification searches in spatial econometrics: the relevance of Hendry’s methodology. Reg Sci Urban Econ 33(5):557–579

    Article  Google Scholar 

  • He Q (2015) Fiscal decentralization and environmental pollution: evidence from Chinese panel data. China Econ Rev 36:86–100

    Article  Google Scholar 

  • He C, Pan F, Yan Y (2012) Is economic transition harmful to China’s urban environment? Evidence from industrial air pollution in Chinese cities. Urban Stud 49(8):1767–1790

    Article  Google Scholar 

  • Hendry DF (1979) Predictive failure and econometric modelling in macroeconomics: the transactions demand for money. In: Ormerod P (ed) Economic modelling. Heinemann, London

    Google Scholar 

  • Hindriks J, Lockwood B (2009) Decentralization and electoral accountability: incentives, separation and voter welfare. Eur J Polit Econ 25(3):385–397

    Article  Google Scholar 

  • Jin J, Zou H (2005) Fiscal decentralization, revenue and expenditure assignments, and growth in China. J Asian Econ 16(6):1047–1064

    Article  Google Scholar 

  • Judd CM, Kenny DA (1981) Process analysis: estimating mediation in treatment evaluations. Eval Rev 5(5):602–619

    Article  Google Scholar 

  • Li H, Zhou LA (2005) Political turnover and economic performance: the incentive role of personnel control in China. J Public Econ 89(9–10):1743–1762

    Article  Google Scholar 

  • List JA, Gerking S (2000) Regulatory federalism and environmental protection in the United States. J Reg Sci 40:453–471

    Article  Google Scholar 

  • Liu LL, Ding DH, He J (2019) The welfare effects of fiscal decentralization: a simple model and evidence from China. Qual Quant 53(1):417–434

    Article  Google Scholar 

  • Mackinnon DP, Warsi G, Dwyer JH (1995) A simulation study of mediated effect measures. Multivar Behav Res 30(3):41–62

    Article  Google Scholar 

  • Millimet DL (2003) Assessing the empirical impact of environmental federalism. J Reg Sci 43:711–733

    Article  Google Scholar 

  • Montinola G, Qian Y, Weingast BR (1995) Federalism, Chinese style: the political basis for economic success in China. World Polit 48(1):50–81

    Article  Google Scholar 

  • Qian Y, Weingast BR (1997) Federalism as a commitment to reserving market incentives. J Econ Perspect 11(40):83–92

    Article  Google Scholar 

  • Que W, Zhang Y, Liu S, Yang C (2018) The spatial effect of fiscal decentralization and factor market segmentation on environmental pollution. J Clean Prod 184:402–413

    Article  Google Scholar 

  • Rodríguezpose A, Ezcurra R (2009) Does decentralization matter for regional disparities? a cross-country analysis. J Econ Geogr 10(5):619–644

    Article  Google Scholar 

  • Shleifer A (1985) A theory of yardstick competition. Rand J Econ 16(3):319–327

    Article  Google Scholar 

  • Sigman H (2007) Decentralization and environmental quality: an international analysis of water pollution. National Bureau of Economic Research no. 13098

  • Song Y (2013) Rising Chinese regional income inequality: the role of fiscal decentralization. China Econ Rev 27:294–309

    Article  Google Scholar 

  • Su FB, Tao R, Lu X, Li M (2012) Local officials’ incentives and China’s economic growth: tournament thesis reexamined and alternative explanatory framework. China World Econ 20(4):1–18

    Article  Google Scholar 

  • Tanzi V, Schuknecht L (1998) Can small governments secure economic and social well-being? In: Grubel H (ed) How to spend the fiscal dividend: what is the optimal size of government?. Fraser Institute, Vancouver

    Google Scholar 

  • Tsui K, Wang Y (2004) Between separate stoves and a single menu: fiscal decentralization in China. China Q 177:71–90

    Article  Google Scholar 

  • West LA, Wong CPW (1995) Fiscal decentralization and growing regional disparities in rural china: some evidence in the provision of social services. Oxf Rev Econ Policy 11(4):70–84

    Article  Google Scholar 

  • Wu Y, Heerink N (2016) Foreign direct investment, fiscal decentralization and land conflicts in China. China Econ Rev 38:92–107

    Article  Google Scholar 

  • Wu AM, Wang W (2013) Determinants of expenditure decentralization: evidence from China. World Dev 46(2):176–184

    Article  Google Scholar 

  • Xie D, Zou H, Davoodi H (1999) Fiscal decentralization and economic growth in the United States. J Urban Econ 45(2):228–239

    Article  Google Scholar 

  • Xu C (2011) The fundamental institutions of China’s reforms and development. J Econ Lit 49(4):1076–1151

    Article  Google Scholar 

  • Zhuravskaya E (2000) Incentives to provide local public goods: fiscal federalism, Russian style. J Public Econ 76(3):337–368

    Article  Google Scholar 

Download references

Acknowledgements

We notably appreciate the Natural Science Foundation of Jiangsu Province of China (BK20190792) for supporting this study.

Author information

Authors and Affiliations

  1. School of Management, University of Science and Technology of China, Hefei, China

    Jianing Zang

  2. School of Public Finance and Taxation, Nanjing University of Finance and Economics, Nanjing, China

    Liangliang Liu

Authors
  1. Jianing Zang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Liangliang Liu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Liangliang Liu.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Zang, J., Liu, L. Fiscal decentralization, government environmental preference, and regional environmental governance efficiency: evidence from China. Ann Reg Sci 65, 439–457 (2020). https://doi.org/10.1007/s00168-020-00989-1

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00168-020-00989-1

JEL Classification

Search

Navigation