Fiscal Revenue Decentralization Research Articles

The Impact of FDI on Labor Productivity in China: Evidence from Panel Data 2003-2020——A Study on Fiscal Decentralization as a moderating variable

Based on the panel data of China’s 30 provinces, autonomous regions, and municipalities (hereinafter referred to as provinces) from 2003 to 2020, this paper empirically analyzes the impact of foreign direct investment (hereinafter referred to as FDI) on labor productivity by constructing a fixed-effects model, and further constructs a model to test the moderating effect of fiscal decentralization on the above two variables. The study shows that: 1) China's FDI has a positive promotion effect on labor productivity. 2) Taking 2008 as the boundary, the effect of China's FDI on labor productivity has significant stage heterogeneity. 3) Fiscal revenue decentralization and fiscal expenditure decentralization both positively regulate the relationship between FDI and labor productivity. Therefore, the Chinese government (as well as the governments of other developing economies around the world) needs to consciously introduce high-quality FDI that is suitable for the country's current development situation and to give local governments the right to select and introduce FDI that is suitable for local development to realize high-quality economic development.

The impact of VAT tax sharing on industrial pollution in China

Contrary to the Chinese central government's strong encouragement of green development, the initiative of local governments in pollution control remains inefficient. This phenomena may be associated with Chinese special tax sharing system. Based on the practice of China's sub-provincial fiscal system reform from 2003 to 2020, this paper examines the impact of sub-provincial revenue share on industrial pollution at the prefecture level, and explores the influence of fiscal incentives caused by VAT tax sharing on local government decision-making. First, we study the effect of VAT tax sharing on industrial pollution through fixed effect model. We find that the increase in VAT tax sharing promotes environmental pollution, especially in the central and western regions. In addition, we analyze the moderating effects of industrialization and government competition on the industrial pollution effect of VAT tax sharing. The results show that the degree of regional industrialization strengthens the pollution effect caused by the increase of VAT sharing, while the government competition weakens the effect. Based on these findings, we also employ the panel threshold model to investigate the nonlinear effects of VAT tax sharing and industrial pollution. Only when the proportion of VAT tax sharing exceeds the threshold value will it have an impact on industrial pollution. This study provides enrich empirical evidence for the successive problems of extreme environmental pollution from the perspective of fiscal revenue decentralization, which is of practical importance for improving tax sharing system and enhancing pollution control efficiency.

What causes dynamic change of green technology progress: Convergence analysis based on industrial restructuring and environmental regulation

Using 57 city-level panel data of Yellow River Economic Belt from 2004 to 2018, this paper investigates the effect of industrial restructuring and environmental regulation on dynamic change of green technology progress (GTP) by convergence models. Industrial restructuring is divided into rationalization and advancement industrial structure. Concretely,δconvergence results present that GTP values of different cities do not converge to steady state, but absoluteβconvergence results show that GTP growth rate of different cities will reach to a certain steady-level. In addition, the estimation results verify the existence of GTP conditionalβconvergence. Rationalization industrial structure, advancement industrial structure, and environmental regulation respectively have significantly positive effect on GTP, but the positive effects of rationalization and advancement industrial structure reduce with the increase of environmental regulation. Moreover, fiscal revenue decentralization and fiscal expenditure decentralization are important transmission channels through which industrial restructuring and environmental regulation affect GTP.

Impact of Chinese fiscal decentralization on industrial green transformation: From the perspective of environmental fiscal policy

To accomplish the goals of carbon mitigation, industrial green transformation is an inevitable requirement for achieving high-quality economic development. Based on the data of 30 provinces in China from 2007 to 2017, this paper uses projection pursuit model and entropy method to calculate the industrial green transformation and Chinese fiscal decentralization. It further employs static and dynamic spatial Durbin model to explore the impact of Chinese fiscal decentralization on industrial green transformation by the environmental fiscal policy. The study finds that: 1) China’s industrial green transformation presents an unbalanced state with high in the east and low in the west, which has a positive spatial spillover among provinces. 2) Fiscal decentralization is significantly conducive to the industrial green transformation, while the spatial spillover of fiscal decentralization is negative. Moreover, fiscal decentralization affects the industrial green transformation by environmental fiscal policy, in of which environmental fiscal expenditure is the main path. 3) From the perspective of heterogeneity of fiscal decentralization, the impact of fiscal expenditure decentralization in promoting industrial green transformation is significantly greater than that of fiscal revenue decentralization. In terms of heterogeneity of regional location, fiscal decentralization in the eastern and central regions plays a role in accelerating industrial green transformation, while it has an obstacle impact in the western region. In terms of market-based heterogeneity, Fiscal decentralization in high-market areas facilitates the green transformation of industry, while in low-market areas is the opposite.

Tax Policies of Low Carbon in China: Effectiveness Evaluation, System Design and Prospects

Fiscal and taxation policy tools play an important role in promoting green and low-carbon development. Based on classical tax theory, including the Potter hypothesis and the environmental Kuznets curve, this paper explores the impact of environmental tax regulation on economic growth and carbon emission reduction. We find that resource tax reform could promote green total factor productivity; however, the ad valorem reform of resource tax does not significantly raise the level of low carbon development. This effect varies among different regions as well as different tax cuts and fee reductions. Fiscal revenue decentralization has a reverse adjustment effect on the impact of resource taxes on green total factor productivity. We conclude that it is necessary to deepen the reform of the fiscal and taxation system to achieve the carbon neutrality and emission peak goal.

Does Fiscal Decentralization Promote or Inhibit the Improvement of Carbon Productivity? Empirical Analysis Based on China’s Data

Based on the panel data of 30 provinces in China from 2010 to 2019, this study empirically analyzes the relationship between fiscal decentralization and carbon productivity using a spatial econometric model and calculates the direct effect, spatial spillover effect, and total effect of fiscal revenue decentralization and fiscal expenditure decentralization on carbon productivity through effect decomposition. The empirical results show that 1) the spatial agglomeration effect of China’s provincial carbon productivity is obvious, which shows an upward trend. The heterogeneity of carbon productivity among different provinces is obvious. The overall performance is as follows: Eastern provinces > Central provinces > Western provinces. 2) Fiscal revenue decentralization and fiscal expenditure decentralization can significantly promote the improvement of carbon productivity. Fiscal expenditure decentralization plays a greater role in promoting carbon productivity than fiscal revenue decentralization. 3) Fiscal revenue decentralization and fiscal expenditure decentralization have significant positive direct effects and negative spatial spillover effects on the improvement of carbon productivity. Increasing fiscal decentralization is conducive to improving the carbon productivity of the province, but it will inhibit the carbon productivity of neighboring provinces. Finally, it puts forward policy suggestions to promote the improvement of carbon productivity from the perspective of fiscal decentralization.

Fiscal decentralization and economic growth revisited: an empirical analysis of poverty governance.

Based on the panel data of 24 provinces from 2010 to 2018, the static panel model was utilized to analyze the impact of fiscal decentralization and economic growth on poverty reduction, and the Moran index was used to calculate the spatial agglomeration effect of poverty degree. Further, we employed Spatial Dobbin model to examine the spatial effect of fiscal decentralization, economic growth, and poverty reduction. Findings of our results revealed that the rapid economic growth and fiscal revenue decentralization have a substantial inhibitory effect on poverty reduction, and fiscal expenditure decentralization has an important promoting influence on poverty reduction. Our results further showed that the degree of inter provincial poverty has significant effect on regional spatial agglomeration, indicating a pattern of high-value agglomeration in the northwestern and southern border areas and low-value agglomeration in the northeastern and central regions. Finally, the results revealed that economic growth rate and fiscal decentralization have spatial spillover effects on the poverty governance. Based on our study findings, policy suggestions are suggested, such as adjustment of the structure of fiscal expenditure, building a coordination mechanism between fairness and efficiency, and encouraging the activities of agricultural production departments.

Does natural resources supervision improve construction land use efficiency: Evidence from China

Based on data from 286 cities, this paper analyzes the realistic effect of natural resource supervision on construction land use efficiency via the difference-in-differences (DID) method and its potential effect via stochastic frontier analysis (SFA). First, in the real economy, natural resource supervision can significantly reduce construction land use efficiency in cities with a natural resource supervision agency (NRSA), but the inhibitory effect gradually weakens. Natural resource supervision can promote the market development of tender, auction and quotation (TAQ) and thereby have an indirect impact by strengthening illegal land management. Second, natural resource supervision can significantly improve construction land use efficiency in cities with an NRSA when the degree of vertical financial asymmetry is high, but it has the opposite effect when the fiscal revenue decentralization level, regional competition level, economic development level and so on are high. Third, in terms of the potential effect, construction land use efficiency in cities without an NRSA is decreasing annually. Natural resource supervision can greatly promote construction land use efficiency in cities with an NRSA and allow these cities to catch up with cities without an NRSA. From the logical starting point of the resident effect of natural resource supervision, this paper focuses on the ultimate goal of high-quality economic development. This study is of great value for reforming the natural resource supervision system, standardizing the development of the land market and perfecting the incentive mechanism for local governments.

Fiscal decentralization and the default risk of Chinese local government debts

AbstractThis paper examines the effects of fiscal decentralization on the default risk of Chinese local government debts based on data from both urban construction investment bonds and local government bonds. The empirical evidence indicates that while fiscal revenue decentralization tends to mitigate the default risk of local government debts, fiscal expenditure decentralization increases it. Four policy measures, namely, fiscal transparency, hard budget constraints, debt quotas, and local officials' ability to manage debt are also introduced to investigate how they affect the influence of fiscal decentralization on Chinese local government debt risk.

Measuring the Efficiency of Fiscal Policies for Environmental Pollution Control and the Spatial Effect of Fiscal Decentralization in China.

This paper uses both fiscal expenditure policy and fiscal revenue policy as input indicators and selects environmental pollution control results reflecting different forms and sources of pollution as output indicators. The efficiency of fiscal policies for environmental pollution control (EFPE) of 30 provincial-level administrative divisions in China from 2007 to 2017 is measured by adopting the data envelopment analysis (DEA) method. Then, the spatial effect of fiscal decentralization on EFPE is empirically analyzed by using the spatial lag model (SLM). The results show that EFPE values in China have been greatly improved overall since 2014. The change in technical efficiency (TE) is caused mainly by the change in pure technical efficiency (PTE). EFPE values have regional heterogeneity and convergence. The eastern region has clearly higher EFPE values than other regions. The growth rate of the low efficient region is greater than that of the high efficient region. Fiscal expenditure decentralization has a direct negative effect and spatial spillover effect on EFPE values, while fiscal revenue decentralization has a non-significant effect. Based on these results, this paper proposes the following policy implications: increasing the level of fiscal expenditure of environmental pollution control and improving the central transfer payment system for environmental protection; reforming the government performance assessment system and innovating the conditions of government expenditure on environmental pollution control; and promoting horizontal fiscal cooperation in cross-regional environmental governance.

Fiscal Decentralization and Local Environmental Pollution in China.

Fiscal decentralization is one of the tools for the central government to engage local governments in environment management. However, its effects are inconclusive. This paper aims to examine the impact of fiscal decentralization on environmental pollution and the role of government environmental preference in China’s provinces. The results show that fiscal revenue decentralization exacerbates local environmental pollution more seriously than expenditure decentralization. This negative environmental effect of fiscal decentralization could be moderated by government environmental preference. Based on our findings, it is recommended that China’s local governments should improve environmental preference so that fiscal decentralization can create a win–win situation for the economy and environment. Furthermore, the different effects of fiscal revenue and expenditure decentralization create a necessity for differentiated management of fiscal decentralization by the central and local governments.

Fiscal Decentralization and Environmental Pollution: A Spatial Analysis

Based on annual data over the period 2003 to 2017 covering 31 provinces in China, the environmental pollution index and environmental regulation index are constructed. Moran’s I, the widely used spatial autocorrelation index, is used to analyze the spatial distribution of environmental pollution, which provides a fairly high stability of the positive spatial correlation of environmental pollution. Then, the 0-1 matrix, distance weighting matrix, and economic distance mixed matrix are carried out to weigh space separately. To analyze the impact of fiscal decentralization on environmental pollution, the spatial Durbin model is employed. In the meanwhile, fiscal decentralization is measured from the perspective of both fiscal expenditure decentralization and fiscal revenue decentralization. The results show that the impact of fiscal decentralization on environmental pollution is positive and appears the phenomenon of “race to bottom.” To improve environmental quality, appropriate environmental regulation target, implementing green GDP accounting, and adjusting economic structure should be adopted.

Environmental effects of Chinese-style fiscal decentralization and the sustainability implications

Abstract Nowadays, as for the developing countries, economic growth and environmental protection serve as two main objectives to achieve sustainability. It has been widely proved that fiscal decentralization is of great use to economic growth, but its environmental effect is still inconclusive. As the complex mechanism for the impact of fiscal decentralization on environment still remains unclear, our study is making an attempt to bridge the gap by introducing a detailed theoretical analysis by making use of a utility maximization approach, and two kinds of fiscal decentralization concerning both revenue and expenditure decentralization are analyzed; besides, an empirical test is further made on their effects on environmental quality and two types of regulations (that is, fiscal environmental input and environmental administrative charge). According to the results of the theoretical analysis, both of the decentralizations have positive effects on environmental improvement. The results of the empirical tests based on the panel data of 30 provinces/municipalities confirm the above theoretical deductions, as well as the following conclusions could also be derived. First of all, the fiscal decentralization has a positive regulatory effect on the environmental regulations mentioned above, which indicates there is synergy between the two kinds of policy tools. Secondly, the empirical results determine a threshold effect of fiscal decentralization on environment. Lastly, compared with expenditure decentralization, the fiscal revenue decentralization proves to be more effective for environmental improvement. Based on these conclusions, it is recommended that the central government should strengthen both environmental management and fiscal decentralization systems so as to achieve a win-win situation for economic growth and environmental protection. Particularly, in order to maximize its potential, we propose that priority be given to fiscal revenue decentralization.

Fiscal Decentralization and Regional Financial Efficiency: An Empirical Analysis of Spatial Durbin Model

Based on panel data covering the period from 2003 to 2012 in China’s 281 prefecture-level cities, we use superefficiency SBM model to measure regional financial efficiency and empirically test the spatial effects of fiscal decentralization on regional financial efficiency with SDM. The estimated results indicate that there exist significant spatial spillover effects among regional financial efficiency with the features of time inertia and spatial dependence. The positive promoting effect of fiscal decentralization on financial efficiency in local region depends on the symmetry between fiscal expenditure decentralization and revenue decentralization. Additionally, there exists inconsistency in the spatial effects of fiscal expenditure decentralization and revenue decentralization on financial efficiency in neighboring regions. The negative effect of fiscal revenue decentralization on financial efficiency in neighboring regions is more significant than that of fiscal expenditure decentralization.