Researches On Environmental Pollution Under Fiscal Decentralization Perspective

The environment pollution problems affect the welfare of people around the world. We focus on the effects of fiscal decentralization on environment pollution. We start from thre different perspectives to discuss the underlying problems, and we get some new findings:Firstly, we discuss the effects of sub-national fiscal decentralization on pollution. The previous researches mainly focus on the provincial-level data, it is hardly to discern the characteristics of different kinds of pollutants. For the different pollutants can cause various spillover effects, we may solve the problem based on the city-level data. The regression results show that the fiscal decentralization increase the amounts of waste water and sulphur dioxide significantly. But fiscal decentralization decreases the amounts of solid waste. Our results also show some robustness.Secondly, we discuss the relations among fiscal decentralization, quality of government and pollution. The theoretical analysis show that the local governments compete for the mobile resources could trigger “race to bottom” phenomenon, i.e. it may loosen the pollution standard. But the improvement on quality of government may mitigate the adverse effect of decentralization on environment. The mitigation effect of good governance can be thought to be the preference for environment quality by local government. Based on the 120 cities survery data conducted by the worldbank in 2006, we show some empirical evidence for the discussion. Our results show that the higher the government quality, the higher the rate of waste disposal.Finally, we investigate the efficieny of environment protection expenditure by provincial government. If we consider the environment quality as public goods, and the local government as the provider for environment quality, we want to know whether the fiscal decentralization could increase the efficiency of environment protection expenditures. Based on the environment protection expenditures from 31 provinces since 1998, we use DEA to calculate the efficiency of environment protection expenditure, and then use panel Tobit model to analyze the effect of fiscal decentralization on environment protection expenditures. The regression results show that the degree of fiscal decentralization could decrease the efficiency of environment protection expenditures.Our researches give some implications for the ongoing debates: the central government should take over the management for the pollutants with high spillover effects. For example, the responsibility of protection for rivers and lakes which are on the boundaries should be allocated to the central government. Central government can use economic instruments, such as fiscal transfers or environment taxs, to solve the spillover effects of pollutants. At same time, central government should better the governance in local governments; the central government can also strengthen the environment protection accountability for the officials of local government, or use PPPs(Public-Private Partnerships) to increase the efficiency of environment protection expenditures.