Research on the Impact of Fiscal Decentralization on Governance Performance of Air Pollution—Empirical Evidence of 30 Provinces from China

Abstract

Air pollution governance is of great benefit to future generations, and its steady performance improvement is inextricably linked to the fiscal relationships between the central and local governments in China’s decentralization context. Based on the provincial panel data from 2011 to 2019, this paper constructs a comprehensive index of air pollution governance performance using the entropy method. Then, the relationship between fiscal decentralization and governance performance of air pollution is measured using a two-way fixed effects model. The results show that the increase in fiscal decentralization is not conducive to the improvement in governance performance of air pollution. Moreover, fiscal decentralization weakens the positive impact of pollution control investment on enhancing governance performance of air pollution while easing the negative impact of local government capital attraction competition on enhancing governance performance of air pollution. In terms of regional level, fiscal decentralization in northern and inland regions significantly negatively impacts air pollution governance performance. However, the above effects are not significant in the southern and coastal regions. The policy implications of the above findings are as follows: first, the central government ought to optimize the financial decentralization system and promote multiple performance assessments. Second, it is essential to adjust the structure of fiscal spending and promote competitive partnerships among local governments. Third, emphasis should be placed on collaborative governance of key regions while developing an effective incentive mechanism.