Research on the competitive effect of local government's environmental expenditure in China

Abstract

Local government's environmental expenditure (LGEE) is critical to ecological protection and environmental governance, and it has not played its due role. By constructing a theoretical model of the competitive effect of LGEE under the intervention of central government, this study used the spatial econometric model to analyze the competitive effect of LGEE based on the data of 30 provinces in China from 2007 to 2016. The main results show that (1) from the perspective of the national area, LGEE shows a U-shaped development model together with economic growth; (2) a significant positive spatial effect in interprovincial LGEE is observed in eastern region, indicating that local government tends to adopt the competitive strategy of mutual imitation. Local government will not reduce environmental expenditure as fiscal decentralization increases; (3) the coefficient of the spatial effect in LGEE is significantly negative in central and western regions, which is manifested as a competitive strategy of mutual substitution. The coefficient of fiscal decentralization is significantly negative, indicating that LGEE relies mainly on the transfer payments from central government, and the essence of interprovincial competition regarding environmental expenditure is the competition for the transfer payments from central government.