Does fiscal decentralization support green economy development? Evidence from China.

Abstract

China, as the world's largest energy consumer, has made the green economy a central component of its economic development strategy. However, how to effectively play the government's crucial role in promoting the development of the green economy has become the focus of research by a significant number of economic experts. This paper uses the Super-SBM model to measure the green economy development index by introducing carbon dioxide emissions and industrial "three wastes" emissions and analyzes the relationship between fiscal decentralization, green technology innovation, and the green economy from the vantage point of local government behavior. It is discovered that fiscal decentralization significantly inhibits the development of the green economy, and local green technology innovation activities in the last period will amplify this negative impact. The above findings pass the robustness test. After introducing comparative analysis of economic growth indicators that are measured by the stochastic frontier analysis (SFA), the results show that only in the eastern region does fiscal decentralization both drive economic growth and do not inhibit green economy development by local government officials' political promotion motives and self-interested preferred expenditures, but overall economic promotion and green economy inhibition caused by fiscal decentralization exist simultaneously in the Yangtze River Economic Belt region, and significant heterogeneity differences exist in the rest of the regions. The findings suggest that regulating local government fiscal behavior and improving fiscal transparency are very important to promote the development of China's green economy.