Fiscal expenditure efficiency and green economic efficiency: evidence from Chinese cities

Abstract

This study develops indicators for evaluating Green Economy Efficiency (GEE) and Fiscal Expenditure Efficiency (FEE) at the prefecture level and above within Chinese cities. Utilizing the super-efficiency SBM model and a three-stage DEA model, we empirically examine the influence of FEE on GEE. To address the issue of endogeneity arising from reverse causality between FEE and GEE, this research employs fiscal autonomy and officials’ tenure as instrumental variables for FEE. The key findings are summarized as follows: (1) GEE exhibits a fluctuating upward trend from 2006 to 2020, while FEE remains relatively stable overall. Notably, the GEE and FEE in the eastern region surpass those in the central and western regions. (2) A one percentage point increase in FEE corresponds to a substantial 7.597% rise in GEE, indicating a significant promotional effect, a result consistently upheld in robustness tests. Furthermore, factors such as urbanization level, economic development, education level, and industrial structure also contribute to urban green economic growth. (3) FEE primarily contributes to GEE through local economic growth, urban infrastructure development, and regional innovation levels. (4) The impact of FEE on GEE is more pronounced in developed cities, larger cities, those with high fiscal freedom, and highly urbanized cities. Based on these conclusions, policy recommendations are proposed: (1) contingent upon local circumstances, each municipal government should optimize its fiscal expenditure structure and enhance FEE based on its unique endowments; (2) make full use of spatial correlation and knowledge spillover effect to promote the coordinated growth of FEE and GEE; (3) improve urban infrastructure construction and encourage regional technological innovation.