How does Chinese-style fiscal decentralization affect green technology innovation?

Abstract

Green technology innovation is crucial to green transformation. Accordingly, the influence of Chinese-style fiscal decentralization on green technology innovation is contingent on whether effective green competition can occur among hierarchical governments. Against this backdrop, the Spatial Durbin Model is used to empirically estimate the impact of Chinese-style fiscal decentralization on green technology innovation, which utilized the panel data of 30 provinces in China from 2010 to 2020. The findings revealed a significant spatial agglomeration effect for green technology innovation in various regions. Besides, fiscal decentralization is evidenced to not only have a positive spatial spillover effect on green technology innovation but also promote green technology innovation at the local level and in surrounding areas, indicating that local governments have formed green preferences and facilitated green innovation technology competition. Moreover, further analysis of induced resource allocation reveals that financial support and environmental regulation have adverse inhibitory and positive promotion effects on green technology innovation, respectively. Furthermore, foreign direct investment, research and development intensity, knowledge reserve level, and industrial structure have varying spatial spillover effects on the level of green technology innovation. In light of these findings, this study recommended that the Chinese government further improves its fiscal decentralization, implements green performance evaluation of local governments, and enhances the coordinated development of various innovation incentives.