Has Fiscal Decentralization Promoted or Restricted Public Environmental Expenditure ?

Abstract

Public environmental expenditures are the crucial means to achieve ecological protection and environmental governance, while fiscal decentralization system is the key factor which affects the preferences of expenditures by local government. In order to further identify whether fiscal decentralization has negative incentives for the behavior of public environmental governance by local government, this paper applies provincial panel data of China from 2007 to 2015, to explore the effect of Chinese-styled fiscal decentralization on public environmental expenditures from the two dimensions of income and expenditure decentralization. The research results show that both income and expenditure decentralization have significant negative correlations with public environmental expenditures, which confirms that current fiscal decentralization system has strong incentive distortions and insufficient constraints on the behavior of public environmental governance by local government. Therefore, in order to promote green development and build a beautiful China, improvements should be made in terms of institutional environment, the relationship of financial authority and powers between central and local government, transfer payment systems, the governance models of regional linkage and collaboration, and environmental protection concepts, etc.