Exploring The Environmental Effects Of Fiscal Expenditure At The Local Level

As the largest developing country,the wrong economic growth development model with the over consumption of resource leads to a series of environmental problems in China.Under the institutional background of China's fiscal decentralization,the local government was principally responsible for local government expenditure duty,thus the local government expenditure had a direct effect on environment.However,under the political achievement evaluation standards of GDP growth,the local government who competed for growth had preference for productive expenditure on account of rational choice and inertial thinking,which hindered the increase of the service expenditure.In addition,the feature of high investment cost and low return of environment also makes the local government less willing to take the initiative to reduce environment emissions which weaken the direct effect of local government spending too.Besides the direct effects,the indirect effects of local government expenditure on environment through economic development were also worthy of attention in the traditional EKC analysis framework.At present,does the increase of local government expenditure help alleviate environmental problems?How the effects of local government expenditure structure on environment?These issues have not been adequately studied in the country.Under the background of Energy-saving and emission reduction,firstly considering the institutional background of China's fiscal decentralization,we build the theoretical model and follow the theory ideas to construct the simultaneous equation model,exploring the relationship among pollutant emissions,economic growth and local government expenditure.Further we make use of panel data of 29 provinces in china during 1998-2012 to carry out the empirical research.Theoretical and empirical results show that firstly local government expenditure has a negative direct effect on per capita pollutant emission,which could hinder emission abatement.Further it could operate through impacting on per capita income to have a indirect effect at different stages of economic development.The strength and direction of the indirect effect are closely related to income level.Secondly,the total effects of local government expenditure structure and size follow the patterns of negative direct effects on sulfur dioxide,but follow the patterns of positive indirect effects on carbon emissions at the mean income level,which means that local government expenditure does not have an absolute reduction effect.Thirdly,we find an inverted-N-shaped curve relationship between pollutant emissions and per income.Therefore,to bring the reducing emission effects of local government expenditure on environment,it is significant to recognize the institutional difficulties of the expenditure structure preference and change the achievement evaluation standards of GDP growth to realize the scientific and green achievement evaluation.At the same time,implementing different public expenditure policy to achieve the coordinated development between economic growth and environmental protection in different regions is also indispensable.