Has Economic Competition Improved China’s Provincial Energy Ecological Efficiency under Fiscal Decentralization?

Abstract

The study of environmental-oriented total factor energy efficiency considering pollutants as a non-expected output has attracted wide attention, but few studies have included social welfare into the above framework for analyzing China’s provincial energy ecological efficiency (EEE). In addition, China’s fiscal decentralization and economic competition have created tremendous momentum for economic growth; however, research has been lacking on whether they have improved China’s energy utilization, pollution control and social welfare level. To fill these gaps, by applying the 2000–2016 panel data from 30 provinces and considering the social welfare condition, we use the slacks-based measure data envelopment analysis (SBM-DEA) method to calculate EEE and build empirical model to test the relation between EEE, fiscal decentralization and economic competition. The results reveal that, firstly, in the last 16 years EEE has been getting worse and the situation of the middle and western areas of China are poorer than in the eastern area, with the middle area still deteriorating further. Secondly, economic competition among local governments aggravates the provincial EEE in China, while the high degree of fiscal decentralization in state governments significantly contributes to improve the EEE; and the co-impact of economic competition on EEE has been negatively strengthened against the background of fiscal decentralization. Thirdly, the influence of economic competition on EEE presents a regional difference; economic competition makes the degree of EEE go down in the east and middle regions, while by contrast, economic competition has helped the EEE level in western regions. The conclusions point out that the temporal trend of EEE in various regions of China, and the economic competition actions adopted by most Chinese local governments to enhance their own financial strength, have not improved energy efficiency and pollution control capability, and has reduced the social welfare of the region. Accordingly, policy proposals are that the Chinese government can adjust the fiscal and tax revenue system and preferential tax system of the central government and local governments and curb competition between provincial jurisdictions.