Study On The Impact Of Fiscal Decentralization On Environmental Quality In China

Since the reform and opening,China's economy has maintained rapid growth,at the same time,the problem of environmental pollution is becoming more and more prominent.To improve the quality of the environment has become an urgent need of the people,the state has introduced series of air pollution,water pollution and other environmental protection policies,but little effects.Most of the literature on environmental issues mainly study from the perspective of welfare economics,public goods demand,externalities,while less attention paid to the deep institutional factors influencing on the environmental quality.In essence,the fiscal decentralization system is a system arrangement,and won't directly affect the quality of the environment,but this institutional arrangement can have the indirect and substantial effect on environmental pollution through the transmission mechanism of selection and preference.Chinese fiscal decentralization has the characteristic of political centralization and economic decentralization.The central authority has the right of appointment and removal of local officials and delegates public management and financial revenue and expenditure authority to local governments.The method appointing by the GDP assessment promotes the enthusiasm of the regional economic development,but also has brought a certain degree of distortion of local government's environmental regulation and governance behavior.With regard to the literature on fiscal decentralization and environmental pollution,the theoretical framework of foreign environmental federalism is more perfect,and the measurement model is more mature.However,due to China's political and economic system and the existence of a substantial difference between the western countries,the significance of the study is limited.Most of the current domestic research is based on provincial level data,lack of discuss on municipal level.Most of the studies use fiscal expenditure decentralization to measure the fiscal decentralization index.However,there is a difference between income and expenditure decentralization index.Different scholars have different opinions about the relationship between fiscal decentralization and environmental quality in China and they ignore the inherent conduction mechanism of fiscal decentralization to environmental pollution and seldom consider the difference of different types of pollution spillovers in different regions.Therefore,this paper empirical studies the relationship between Chinese fiscal decentralization system and different environmental pollution from the index of income and expenditure decentralization angle based on the municipal panel data from 2007 to 2014.By analyzing the contribution rate of the transmission mechanism,in order to guide the government behavior and solve the problem of environmental pollution more reasonably and effectively.Our results confirm that incentive distortions and insufficient constraints of chinese-style decentralization institution affect the behavior of local government and eventually reduce the environmental quality while showing the well established positive decentralization-environment association in the regional industrial structure than investment of environmental protection.We also find that the influence on different externality environmental pollution by fiscal decentralization in different cities has significant difference and the negative effect of fiscal decentralization on environmental quality in the western region is greater.Policy implications of this article:adjust the industrial structure distribution and pay more attention to the upgrading of secondary industry;improve the environmental tax system and establish a special fund for energy conservation and environmental protection;put environmental indicators into officials' promotion incentive and clear division of powers between governments to improve the decentralization system;establish different environmental protection strategies reasonably.