The Relations Between Fiscal Decentralization And Pollution

The last30years has seen an economic achievement of China so dramatic that haddrawn the attention of the whole world. Urbanization and modernization are speedingup. This kind of economic development was in close association with the fiscaldescentralization of China, which inspired the initiatives among local government topursue economic growth. The incentives of political promotion and the powercentralization of central government implied that the patronage of loacal chief officerswere at the mercy of central government. In order to get a political promotion under asystem of GDP-orienated government achievement assessment, local governorstended to ignore other objectives, like environment protection. Under a system offiscal descentralization, local governors were motivated to increase fiscal revenue andto get a promotion by allocating superior resources to segments which were morebenefitial for economic growth, or by attracting severely pollutional enterprises withpreferential policies which included a lower environmental protection threshold. So,the key point of the paper is that fiscal descentralization is majorly accounted for thepollution of China.By adopting the provincial panel data of China from1999to2010, this paperanalyzed the relationship between pollution and fiscal descentralization, as measuredby fiscal descentralization of expenditure and revenue. The results indicate that all thethree types of pollutant are positively correlated to fiscal descentralization ofexpenditure, yet not very certain with the fiscal descentralization of revenue. Thepositive correlation maintains after the regional difference checking by deviding thecountry into east, middle, and west region. And the positive influence in middle andwest region is more prominent than in the east.In the analysis, factors like secondary industry ratio and FDI are employed in anattempt to improve the fitting accuracy of the regression. But the results indicate thatthese factors are inconspicuous in the formulation.In order to improve the invironment, firstly, we need to reform the incentivesystem of political promotion, which based on the GDP-orienated governmentachievement assessment before, by making environmental protection a key index inassessing governor’s achievement. Secondly, consummate the management system of fiscal revenue and expenditure, match up the responsibilities and fiscal power of localgovernment. Thirdly, expand approaches for citizens of China to supervise localgovernment in environmental protection.