Fiscal Resources Research Articles

Do Fiscal Incentives Contribute to Pollution Control? Empirical Evidence from China

Given the growing concerns over environmental degradation and the demand for sustainable development, the Chinese government has implemented several fiscal incentive policies to enhance environmental governance. Taking the phased comprehensive demonstration cities of the Energy Saving and Emission Reduction Fiscal Policy (ESERFP) as an exogenous shock, this study uses a staggered difference-in-differences method to evaluate the impact of the fiscal incentive policy on pollution control using panel data from 268 prefecture-level cities in China from 2003 to 2017. The results indicate that the industrial pollutant emissions in the demonstration cities significantly decreased compared with those in the non-demonstration cities under the influence of the ESERFP. Specifically, industrial wastewater discharges in the demonstration cities decreased by 15.5% while industrial sulfur dioxide emissions decreased by 19.5%. Moreover, promoting industrial structure upgrades and green technology innovations are the main mechanisms of the ESERFP in reducing industrial pollution emissions. Furthermore, the emission-reduction effect of the ESERFP is more significant in areas with more fiscal resources, lower promotion incentives based on local economic performance, greater emphasis on environmental protection, and those with no old industrial bases. Further analysis shows that the positive effect of the ESERFP on pollution control in the demonstration cities remains relatively effective after the demonstration period ends, and the policy does not sacrifice economic dividends. Overall, this study explores the impact of fiscal incentive policies designed to achieve environmental improvements via pollution control, offering valuable fiscal policy insights for China and other developing economies seeking solutions to environmental pollution, including fiscal incentive policy formulation and implementation, fiscal incentives to support regional green transformations, improving the differentiation and precision of fiscal incentives and enhancing environmental performance assessment.

A simple model of internal and external balance for resource‐rich developing countries

AbstractWe present a simple model of internal and external balance that incorporates key features of resource‐rich developing countries (RRDCs). The main result is that ‘government take’—the ratio of fiscal resource revenue to resource output—is a key determinant of the equilibrium real exchange rate (ERER) in these countries. Examining the case of Papua New Guinea, which has grappled with foreign exchange restrictions since 2015, we find that about half of the RER overvaluation estimated at 26% in 2019 would disappear if the current low level of government take was to be lifted to its long‐term average. The analysis has two key takeaways for RRDCs. First, changes in the government take require adjustments to the RER and fiscal policy to maintain internal and external balance. Second, economic adjustments to falls in the take are difficult; therefore, policies seeking to stabilise the take over time to promote macroeconomic stability are recommended.

Assessing the Challenges in Managing School Funds for Heads of Secondary Schools in Kilolo District, Tanzania

This study sought to identify the “Challenges in Managing School Funds for Heads of Secondary Schools in Kilolo District, Tanzania” through a mixed approach with the population of one District educational officer, six heads of schools, six school bursars and sixty-three secondary school teachers who obtained through purposive sampling and simple random techniques. Questionnaires and interviews used to collect data. Data analysed through thematic analysis and descriptive statistics with the aid of the Statistical Package for Social Sciences (SPSS) computer software. The findings found that heads of secondary schools faced numerous challenges such as inadequate funds from the government, inconsistencies disbursement of money from the government and bureaucracy. In addition, distance (remoteness of the schools), transport cost and time consumer when heads of schools needs procurement budgets approved from the District Educational Officer, poor support from the parents and some staff as well as denying school management training on financial management issues were among the challenges. Lastly, the findings found that training, workshops, provision of seminars will enhancing the heads of schools’ financial management literacy. Moreover, heads of schools should involve other staff members, school management team (SMT), and the use of educational financial guidelines as a source of knowledge and skills to manage schools’ fiscal resources. It also recommended that the heads of schools should adhere to the proper practices of financial management through monetary auditing. Likewise, Tanzania government should provide managerial training, workshops and seminars as the best strategies to diminish financial management challenges as well as introducing financial management courses in teachers’ colleges and universities prepare experts in the schools’ financial management activities.

Fiscal decentralization's impact on carbon emissions and its interactions with environmental regulations, economic development, and industrialization: Evidence from 288 cities in China

Given the global focus on climate change and sustainable development, understanding the impact of China's fiscal decentralization on carbon emissions is essential for supporting green transformation and achieving carbon peaking and neutrality targets. This study examines data from 288 Chinese cities between 2003 and 2021, using fixed effects, moderation effects, and threshold effects models to assess the relationship between fiscal decentralization and carbon emissions, alongside its interaction with environmental regulation, economic development, industrialization, and city hierarchy. The results show that fiscal decentralization significantly aids carbon reduction, but stronger environmental regulations have not effectively slowed emission growth, creating a "green paradox." Relaxed regulations prioritize short-term economic gains, leading to underinvestment and fragmented regulatory efforts, which weaken emissions control. As economic development advances, fiscal decentralization's impact on carbon emissions shifts from positive to negative. Additionally, with increasing industrialization, the negative influence of fiscal decentralization on emission intensity becomes more pronounced. In non-first-tier cities, weak regulatory enforcement and limited autonomy hinder effective carbon reduction policies. To address these issues, the central government should enhance guidance and oversight of local environmental policies, ensure strict enforcement, optimize fiscal resources for environmental investment, and promote green economic transformation. A tailored approach to fiscal decentralization is needed to balance economic growth with environmental protection, achieving mutually beneficial outcomes.

The hidden crowding out effect: How does local government implicit debt pressure influence enterprise productivity in China?

AbstractTo explore whether and how local government implicit debts pressure (LGIDP) affects the firm performance, this paper bases on the 2012–2018 listed enterprise data and local government financing vehicles (LGFVs) data to empirically test the impact of LGIDP on the total factor productivity (TFP) of non‐local government financing vehicles (N‐LGFVs). The results show that LGIDP significantly reduced the TFP of N‐LGFVs by transferring fiscal resources, enhancing tax collection, and transferring credit resources. But this distorting effect of LGIDP on the TFP of N‐LGFVs only exists in non‐state‐owned enterprises, small‐scale enterprises, and young enterprises. Our paper has an important policy recommendation that regulating LGFVs and alleviating LGIDP are of great significance for China to achieve sustained economic growth.

Vertical fiscal imbalances, environmental regulations and resource allocation — in the Chinese context

ABSTRACT Vertical fiscal imbalances (VFI) in China have created significant challenges for resource allocation and environmental governance. This study investigates the impact of VFI on resource allocation in Chinese cities. Results show that VFI intensifies resource misallocation, particularly at the provincial compared to the municipal level. And VFI influences resource allocation via informal and formal environmental regulations, with public and administrative regulations mitigating effects, while supervisory regulations exacerbate them. The negative impact of VFI is especially pronounced in declining cities, non-industrial hubs, and regions with severe resource misallocation. Additionally, VFI and resource misallocation demonstrate negative spatial spillover effects. Our findings provide valuable insights into the influence of VFI across different administrative levels in China, highlighting the need for policy reforms to address these fiscal disparities.

Telehealth Uptake Among Hispanic People During COVID-19: Retrospective Observational Study.

The Hispanic community represents a sizeable community that experiences inequities in the US health care system. As the system has moved toward digital health platforms, evaluating the potential impact on Hispanic communities is critical. The study aimed to investigate demographic, socioeconomic, and behavioral factors contributing to low telehealth use in Hispanic communities. We used a retrospective observation study design to examine the study objectives. The COVID-19 Research Database Consortium provided the Analytics IQ PeopleCore consumer data and Office Alley claims data. The study period was from March 2020 to April 2021. Multiple logistic regression was used to determine the odds of using telehealth services. We examined 3,478,287 unique Hispanic patients, 16.6% (577,396) of whom used telehealth. Results suggested that patients aged between 18 and 44 years were more likely to use telehealth (odds ratio [OR] 1.07, 95% CI 1.05-1.1; P<.001) than patients aged older than 65 years. Across all age groups, patients with high incomes were at least 20% more likely to use telehealth than patients with lower incomes (P<.001); patients who had a primary care physician (P=.01), exhibited high medical usage (P<.001), or were interested in exercise (P=.03) were more likely to use telehealth; patients who had unhealthy behaviors such as smoking and alcohol consumption were less likely to use telehealth (P<.001). Male patients were less likely than female patients to use telehealth among patients aged 65 years and older (OR 0.94, 95% CI 0.93-0.95; P<.001), while male patients aged between 18 and 44 years were more likely to use telehealth (OR 1.05, 95% CI 1.03-1.07; P<.001). Among patients younger than 65 years, full-time employment was positively associated with telehealth use (P<.001). Patients aged between 18 and 44 years with high school or less education were 2% less likely to use telehealth (OR 0.98, 95% CI 0.97-0.99; P=.005). Results also revealed a positive association with using WebMD (WebMD LLC) among patients aged older than 44 years (P<.001), while there was a negative association with electronic prescriptions among those who were aged between 18 and 44 years (P=.009) and aged between 45 and 64 years (P=.004). This study demonstrates that telehealth use among Hispanic communities is dependent upon factors such as age, gender, education, socioeconomic status, current health care engagement, and health behaviors. To address these challenges, we advocate for interdisciplinary approaches that involve medical professionals, insurance providers, and community-based services actively engaging with Hispanic communities and promoting telehealth use. We propose the following recommendations: enhance access to health insurance, improve access to primary care providers, and allocate fiscal and educational resources to support telehealth use. As telehealth increasingly shapes health care delivery, it is vital for professionals to facilitate the use of all available avenues for accessing care.

The Myth (or Folly) of African Debt

Despite past debt relief initiatives, the external debt of Africa is rising again, and it has some new worrying features: diminishing concessionality and a rising private creditor. Sub-Saharan African countries devote a significant portion of their fiscal resources to service the debt, and this prevents them from increasing development expenditures (generally imports of strategic goods that can't be produced domestically). By adding a human development factor to the Geometry of Debt Sustainability model (GDS) (Vaggi and Prizzon 2014) and following the analytical framework of Pasinetti (1998), we assess how external debt sustainability changes when countries increase the foreign currency purchasing of health and education goods and services. Not only these types of human development expenditures are central to the Sustainable Development Goals (SDGs), but they have become even more important due to impact of the Covid-19 pandemic on many low income countries (LICs). We evaluate external debt sustainability in two African contexts: Kenya and a composite country, called Ubuntu, which is representative of Sub-Saharan Africa average indebtedness conditions. The results confirm the existence of a trade-off between debt service and human development expenditures. Even before the Covid-19 pandemic, the Sub-Saharan African countries were on unsustainable debt trajectories as the debt-to-GDP ratios would stabilize only at extremely high values.

Coupling and Coordination Development, Spatiotemporal Evolution, and Driving Factors of China’s Digital Countryside and Inclusive Green Growth in Rural Areas

Inclusive green growth is an effective strategy for achieving sustainable development in rural areas. In the digital economy era, it is crucial to examine whether rural digital development and inclusive green growth can be harmoniously integrated. This study investigates the spatial and temporal evolution of the coupled coordination between digital village construction and rural inclusive green growth in China. Utilizing panel data from 30 provinces from 2011 to 2022, we assess development levels using the entropy weighting method and analyze interdependencies with a coupling coordination model. The results indicate an upward trend in coupling coordination, with significant regional disparities, and it is slowly taking on the characteristics of spatial clustering. Economically advanced regions exhibit higher coordination levels, attributed to stronger economic foundations and better fiscal resources, enabling effective investments in digital infrastructure and green growth initiatives. Additionally, factors such as urbanization rate, innovation levels, reduction in natural disasters, increased financial support for agriculture, and improved large-scale operations positively contribute to this coordination. These findings offer insights for targeted regional development strategies, enhancing the synergy between digital transformation and sustainable rural development.

Spatiotemporal impact of fiscal decentralization and economic growth: evidence at provincial level in Vietnam

ABSTRACT This study examines the spatiotemporal impact of fiscal decentralization on economic growth at the provincial level in Vietnam with data from 2010 to 2018. The results show a complex relationship where the direct, indirect, and total effects of fiscal decentralization on economic growth are positive in the short-term but negative in the long-term. Additionally, this study shows that the North tends to use fiscal decentralization resources for growth purposes more effectively than the South. These results confirm that it is necessary to take into account both similarities and differences in local contexts in estimating the impact of fiscal decentralization. Thereby, our results suggest that fiscal decentralization policy should focus on some key provinces/regions to achieve optimal growth before the diminishing effectiveness increases in the long-term.

Social exclusion, corruption, recall of authorities, inequality and fiscal centralization: inducers of social conflict in Peru (2016-2023).

The objective of the article was to investigate the possible inducing factors that contributed to determine the frequency of social conflicts at the subnational level in Peru between 2016 and 2021, including income inequality, social exclusion, fiscal centralism, corruption and revocation of authorities, for which four regression models were built. Disaggregated official data from the 24 departments and the provinces of Lima and Callao were analyzed. Economic inequality was associated with the Gini coefficient. To establish the association between social conflict and the inducers, it was estimated using Spearman's Rho correlation coefficient. Statistical calculation was also employed to appreciate the collinearity between the inducers. The results showed that the revocation of subnational authorities determines 42.5% of social conflict. On the other hand, corruption and fiscal centralism determine 28.5% of the perception of suffering social exclusion. Inequality and social conflict determined 21.8% of the relevance of the execution and quality of public spending by the national government in the regions. Sixty percent of social conflicts in Peru are of an environmental nature. The population that has declared the greatest discrimination corresponds to Puno (28%). 55.6% of those surveyed consider corruption to be one of the country's main problems. Corruption and social exclusion have a negative impact on the effectiveness of economic results and promote social conflicts. Inefficient use of fiscal resources translates into low quality of services and diminished credibility of the national and subnational governments. This situation highlights the need to design public policies that reduce conflicts and promote adequate governance.

Indian Fiscal Federalism and Resource Gap of State Governments: Measurement and Analysis

This article examines the various forms of basic resource gap (BRG) and fiscal dependency in a long-term panel framework, comprising 14 major Indian states from 1981–82 to 2016–17. Further, it decomposes the level and extent of states’ fiscal dependence on transfers and borrowings, which together constitute the total non-own source of revenue on a disaggregated level into three different phases to gain a thorough understanding of the states’ vulnerability and the quality of dependence. The findings show that among the 14 states, Odisha, Karnataka, Tamil Nadu and Uttar Pradesh are leading the way in reducing the BRG during the third sub-period. Odisha’s fiscal dependency has decreased faster and has been sustained to a greater extent than in the other states. In contrast, the accumulation of unsustainably higher levels of debt and guarantees is an issue of concern in West Bengal, Punjab and Kerala, where discretionary sources of revenue have increased significantly in recent decades. The study finds that, despite several incentive-based reform measures, the BRG persists, with mounting fiscal challenges besides a decline in non-debt capital receipts across the Indian states.

How green investment significantly relieves resource curse? A new perspective from fiscal decentralization

Harsh weather, climate change, and pandemics have wreaked havoc on global economies. Evidently, green investment has become an imperative tool for realizing sustainable economic development in response to these calamities. This article adopts the regression discontinuity design (RDD) as well as stage heterogeneity influential mechanism analysis to study the nonlinear form and potential mechanisms of green investment in mitigating the ecological resource curse, based on provincial panel data of China from 2006 to 2020. The study findings indicate an inverted U-shaped curve in the linkage between green investment and pollution emission, with a turning point at 4.98. Moreover, the analysis of heterogeneity mechanisms reflects that local fiscal decentralization and resource dependence initially impede the effect of green investment on mitigating the ecological resource curse. Nonetheless, as green investment matures, the curse is primarily alleviated through substantive innovation in eco-friendly practices. By investigating the regional and resource endowment heterogeneity, it is obvious that inland and non-resource-based regions are more inclined to benefit from green investment in alleviating the environmental resource curse. Thus, this paper proposes certain policy recommendations tailored to regional characteristics, such as fostering a greener consumption mindset and minimizing industry reliance in resource-based zones.

Fiscal decentralization, leader localization, and reduction of pollution and carbon emissions —empirical evidence from China's fiscal “province-managing-county” reform

The fiscal system plays an important role in the government's environmental governance efforts. There is currently no consensus on how fiscal structure adjustments impact pollution and carbon reduction. This paper uses China's fiscal “province-managing-county” reform (FPMCR) implemented in 2004 as a quasi-natural experiment, utilizing panel data from 1670 counties in China from 2000 to 2020 to investigate the impact of fiscal decentralization on reduction pollution and carbon emissions (RPCE), as well as its underlying mechanisms. The results show that (1) from 2000 to 2020, China's RPCE shows an overall trend of fluctuating increase, with its value turning positive after 2013. China's RPCE exhibits a spatial pattern characterized by “lower in the north, higher in the south; higher in the east, lower in the west”. (2) After implementing FPMCR, the RPCE levels in reformed counties decreased by −1.44%, showing that reformed county-level governments prioritize economic development over environmental protection. (3) The mechanism analysis found that after implementing FPMCR, reformed counties experienced a 9.16% increase in nighttime light intensity (NLI), and a 3.99% and 4.34% increase in the number of large-scale industrial enterprises (NLIE) and industrial agglomeration (IA), respectively. This suggests that FPMCR leads to radical urbanization and rapid industrialization in counties, which is detrimental to the improvement of RPCE levels. (4) The spatial heterogeneity analysis found that FPMCR's impact coefficient on RPCE levels in the eastern regions is −1.96%, while in the western regions it is −1.16%. This indicates that reformed counties in the eastern regions are more likely to invest expanded fiscal resources in economic development projects, leading to a decrease in RPCE levels. (5) The temporal heterogeneity analysis found that after the promulgation of the “Three-Year Action Plan to Win the Blue Sky Defense Battle” in 2018, the adverse impact of FPMCR on RPCE is completely reversed, leading to a 1.76% increase in RPCE levels. (6) Further analysis reveals that localizing leaders can slow down the promotion of county-level urbanization and industrialization by the FPMCR, benefiting the improvement of RPCE levels. In other words, “the outsider monk will not recite scriptures as well as a local one”. This study has clarified the causal relationship and underlying mechanisms between fiscal decentralization and environmental governance, providing reliable theoretical support for optimizing grassroots fiscal systems and reducing environmental pollution in other transitional economies. It enriches the field of environmental economics related to fiscal decentralization.

Fiscal decentralization and public sector efficiency: Do natural disasters matter?

This paper investigates the impact of fiscal decentralization on public sector efficiency, emphasizing the mediating role of natural disasters, a relevant question in a context of scarce fiscal resources. We analyze data from 36 OECD countries between 2006 and 2019, employing Data Envelopment Analysis to compute efficiency scores and using panel data alongside impulse response methods to estimate the effects of decentralization. Our findings indicate that while tax revenue decentralization generally diminishes public sector efficiency, spending decentralization and higher regional authority indices enhance it. However, in the context of severe natural disasters, these relationships alter: spending decentralization's positive effect on efficiency diminishes, and the adverse impact of tax revenue decentralization intensifies. These results underline the complex dynamics between fiscal decentralization and public sector efficiency, particularly in the face of extreme natural events, indicating that decentralized fiscal responses are less effective during such crises.

Analyzing Fiscal Sustainability in Latin American Countries: A Time–Frequency Perspective

This study examines fiscal sustainability in Latin American countries from a unique time–frequency perspective, focusing on Brazil, Chile, Colombia, Peru, and Mexico from 1997 to 2022. Using wavelet coherence analysis, it uncovers dynamic relationships between government revenue and expenditure over different time horizons, revealing varying causality patterns across countries and periods. The findings underscore the importance of balanced fiscal planning and resource allocation to ensure fiscal sustainability and support economic growth. This research contributes to a deeper understanding of Latin America’s economic landscape and provides valuable insights for policymakers, economists, and stakeholders concerned with the region’s economic stability and development.

Defence spending and real growth in an asymmetric environment: Accessing evidence from a developing economy

AbstractThe connection between the defence spending and real growth remains a forefront subject of theoretical and empirical research. Nigeria, like many other developing nations, continues to devote numerous fiscal resources to military spending in ensuring peaceful coexistence and to attain sustainable economic growth after her independence in 1960. Because the interdependence between them has policy implications, this paper studies whether there exists asymmetric causality between them. The dataset, from World Bank database, includes long‐range historical series for military expenditure/GDP ratio and growth rate of GDP, covering 1960–2021. In exploring the empirical relations, the paper shows evidence for the symmetric Granger causality, from Toda–Yamamoto (1995) and asymmetric causality, from Hatemi‐J (2012). The standard (symmetric) identifies unidirectional causality evidence, from defence spending to the GDP per capital growth, with no retained potential feedback from real growth to defence spending. The Hatemi‐J (asymmetric) causality maintains evidence that positive shocks in the defence spending may cause a positive shock in the GDP per capital, supposing that increase perturbations to defence spending would be productive and growth‐enhancing. This causal impact is not evident for positive growth shocks. The findings support the need for policymakers to consider sustained growth targets when redesigning the military budget.

Extension and Revision of Monetary Policy Transmission Mechanisms and Domestic Real Investment in Nigeria: A Time Series Study Between 1981-2015 by Lucky Anyike Lucky &amp; Uzah Cheta Kingsley.

The study by Lucky Anyike and Uzah Cheta Kingsley examines the impact of monetary policy on domestic real investment in Nigeria, using Gross Fixed Capital Formation to Gross Domestic Product ratio as a proxy for domestic real investment. The study uses various independent variables, including the maximum lending rate, credit to private sector as a percentage of GDP, naira to US dollar exchange rate, savings rate, monetary policy rate, prime lending rate, and Treasury bill rate. The authors conclude that monetary policy has a significant effect on the domestic real investment rate. The extension of this paper examines the impact of both monetary and fiscal policy on domestic real investment in Nigeria, while also considering the influence of political biases and the fact that a significant portion of fiscal policy spending may be allocated to current expenditures rather than capital expenditures. While mainstream economic theory suggests that fiscal policy should have a positive effect on real investment rate, this theory may be challenged in Nigeria due to the specific context and allocation of fiscal resources. We also examine the effect of monetary policy on domestic real investment rate in Nigeria by incorporating additional variables in our analysis.

Local Fiscal Response to State Preemption: A Case Study of Massachusetts’ Proposition 2½ Tax Referendum

Abstract State preemption in the form of tax and expenditure limits significantly limits local revenue-raising capacity. To gain insights into how local governments respond to fiscal preemption through direct democracy, this study focuses on tax referenda that override the levy limit set by Proposition 2½ in Massachusetts. Analyzing a sample of 320 municipalities from 2010 to 2021, we investigate the influence of fiscal slack resources and tax burden on the levy limit overrides and exclusions. Our analysis breaks down the tax referendum process into two stages, highlighting the involvement of different decision-makers: local officials proposing the referendum and individual voters approving it. We find that municipalities are motivated to seek tax referenda due to diminishing fiscal slack resources, yet the tax burden on residents can discourage such pursuits.

Extension and Revision of Monetary Policy Transmission Mechanisms and Domestic Real Investment in Nigeria: A Time Series Study Between 1981-2015 by Lucky Anyike Lucky &amp; Uzah Cheta Kingsley

The study by Lucky Anyike and Uzah Cheta Kingsley examines the impact of monetary policy on domestic real investment in Nigeria, using Gross Fixed Capital Formation to Gross Domestic Product ratio as a proxy for domestic real investment. The study uses various independent variables, including the maximum lending rate, credit to private sector as a percentage of GDP, naira to US dollar exchange rate, savings rate, monetary policy rate, prime lending rate, and Treasury bill rate. The authors conclude that monetary policy has a significant effect on the domestic real investment rate. The extension of this paper examines the impact of both monetary and fiscal policy on domestic real investment in Nigeria, while also considering the influence of political biases and the fact that a significant portion of fiscal policy spending may be allocated to current expenditures rather than capital expenditures. While mainstream economic theory suggests that fiscal policy should have a positive effect on real investment rate, this theory may be challenged in Nigeria due to the specific context and allocation of fiscal resources. We also examine the effect of monetary policy on domestic real investment rate in Nigeria by incorporating additional variables in our analysis.