Fiscal Decentralization, Local Government Behavior, and Macroeconomic Effects of Environmental Policy

With the rapid economic growth, environmental problems have become a significant bottleneck restricting the high-quality development of China’s economy. In the fiscal decentralization system, balancing economic growth and environmental governance is an issue that needs to be paid attention to in fis...
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Gespeichert in:

Autor*in:	Shi Chen [verfasserIn] Xun Liu [verfasserIn] Chong Lu [verfasserIn]

Format:	E-Artikel
Sprache:	Englisch

Erschienen:	2022

Schlagwörter:	fiscal decentralization environmental policy E-DSGE model local government behavior policy evaluation and design

Übergeordnetes Werk:	In: Sustainability - MDPI AG, 2009, 14(2022), 17, p 11069
Übergeordnetes Werk:	volume:14 ; year:2022 ; number:17, p 11069

Links:	Link aufrufen Link aufrufen Link aufrufen Journal toc

DOI / URN:	10.3390/su141711069

Katalog-ID:	DOAJ012248789

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language	English
source	In Sustainability 14(2022), 17, p 11069 volume:14 year:2022 number:17, p 11069
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authorswithroles_txt_mv	Shi Chen @@aut@@ Xun Liu @@aut@@ Chong Lu @@aut@@
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callnumber-first	T - Technology
author	Shi Chen
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title	Fiscal Decentralization, Local Government Behavior, and Macroeconomic Effects of Environmental Policy
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title_sort	fiscal decentralization, local government behavior, and macroeconomic effects of environmental policy
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title_auth	Fiscal Decentralization, Local Government Behavior, and Macroeconomic Effects of Environmental Policy
abstract	With the rapid economic growth, environmental problems have become a significant bottleneck restricting the high-quality development of China’s economy. In the fiscal decentralization system, balancing economic growth and environmental governance is an issue that needs to be paid attention to in fiscal policy. This paper studies the impact of fiscal decentralization on the environmental policy in China. We incorporate the central and local government structure into a standard environmental dynamic stochastic general equilibrium (E-DSGE) model. The economy was featured with multiple-level governments where the local governments implement fiscal policies through the trade-off between pursuing economic growth and environmental governance. The results indicate that implementing a carbon emission tax is not conducive to economic growth but helps reduce environmental pollution. Second, deepening fiscal decentralization has heterogeneous effects on central and local fiscal expenditures. Deepening fiscal decentralization strengthens the positive externality of local government expenditures to output, but it also leads to further deterioration of environmental pollution. The positive externality of the central government expenditures will weaken with the increase in fiscal decentralization, but it is conducive to improving the quality of the environment. Third, deepening fiscal decentralization is conducive to improving social welfare and alleviating environmental pollution. If the local government fiscal expenditures are biased toward environmental governance expenditures, this is beneficial to improve social welfare and the quality of the environment.
abstractGer	With the rapid economic growth, environmental problems have become a significant bottleneck restricting the high-quality development of China’s economy. In the fiscal decentralization system, balancing economic growth and environmental governance is an issue that needs to be paid attention to in fiscal policy. This paper studies the impact of fiscal decentralization on the environmental policy in China. We incorporate the central and local government structure into a standard environmental dynamic stochastic general equilibrium (E-DSGE) model. The economy was featured with multiple-level governments where the local governments implement fiscal policies through the trade-off between pursuing economic growth and environmental governance. The results indicate that implementing a carbon emission tax is not conducive to economic growth but helps reduce environmental pollution. Second, deepening fiscal decentralization has heterogeneous effects on central and local fiscal expenditures. Deepening fiscal decentralization strengthens the positive externality of local government expenditures to output, but it also leads to further deterioration of environmental pollution. The positive externality of the central government expenditures will weaken with the increase in fiscal decentralization, but it is conducive to improving the quality of the environment. Third, deepening fiscal decentralization is conducive to improving social welfare and alleviating environmental pollution. If the local government fiscal expenditures are biased toward environmental governance expenditures, this is beneficial to improve social welfare and the quality of the environment.
abstract_unstemmed	With the rapid economic growth, environmental problems have become a significant bottleneck restricting the high-quality development of China’s economy. In the fiscal decentralization system, balancing economic growth and environmental governance is an issue that needs to be paid attention to in fiscal policy. This paper studies the impact of fiscal decentralization on the environmental policy in China. We incorporate the central and local government structure into a standard environmental dynamic stochastic general equilibrium (E-DSGE) model. The economy was featured with multiple-level governments where the local governments implement fiscal policies through the trade-off between pursuing economic growth and environmental governance. The results indicate that implementing a carbon emission tax is not conducive to economic growth but helps reduce environmental pollution. Second, deepening fiscal decentralization has heterogeneous effects on central and local fiscal expenditures. Deepening fiscal decentralization strengthens the positive externality of local government expenditures to output, but it also leads to further deterioration of environmental pollution. The positive externality of the central government expenditures will weaken with the increase in fiscal decentralization, but it is conducive to improving the quality of the environment. Third, deepening fiscal decentralization is conducive to improving social welfare and alleviating environmental pollution. If the local government fiscal expenditures are biased toward environmental governance expenditures, this is beneficial to improve social welfare and the quality of the environment.
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