Fiscal Expenditure Structure, Vertical Fiscal Imbalance and Environmental Pollution

• Published in: International journal of environmental research and public health Vol. 19; no. 13; p. 8106
• Main Author: Qin, Fengqin
• Format: Journal Article
• Language: English
• Published: Basel MDPI AG 01.07.2022; MDPI
• Subjects: Climate change; Consciousness; Decentralization; Economic growth; Environmental impact; Environmental incentives; Environmental protection; Environmental quality; Environmental restoration; Expenditures; Externality; Federal government; Government spending; Hypotheses; Industrial development; International trade; Literature reviews; Local government; Politics; Pollution; Pollution control; Power; Social responsibility; China
• ISSN: 1660-4601; 1661-7827; 1660-4601
• DOI: 10.3390/ijerph19138106

Based on China’s provincial panel data from 2007 to 2019, the authors of this paper conducted an empirical test on the direct effect of China’s fiscal expenditure structure on the reduction in environmental pollution with the use of a fixed effect model. We also creatively added an interaction item comprising vertical fiscal imbalance and the expenditure structure to further study the impact of vertical fiscal imbalance on reducing environmental pollution and its effect on the fiscal expenditure structure. The study results show that a structure in favor of expenditure on people’s welfare noticeably reduces environmental pollution. However, after the introduction of the vertical fiscal imbalance indicator, the pollution reduction effect decreases. That is, the vertical fiscal imbalance weakens and distorts the impact of the fiscal expenditure structure on the reduction in environmental pollution. Therefore, it is possible to further motivate local governments with incentive measures, such as fiscal decentralization and the centralization of administrative responsibilities, and regulate the environmental pollution of local governments through use of restrictive measures, such as the “green GDP” evaluation mechanism to further improve the fiscal expenditure structure of local governments, enhance the environmental pollution reduction capability of fiscal expenditure.