Intergovernmental fiscal transfers and CO₂ emissions in China

Abstract

Effectively evaluating the influencing factors of environmental pollution at the system level has become a hot topic in sustainable socioeconomic development; however, none of the existing studies have attempted to explore the relationship between intergovernmental fiscal transfers and environmental pollution. In this work, we aim to address the research gap from theoretical and empirical perspectives. Under the framework of endogenous growth theory, we first analyze the dynamic relationship between intergovernmental fiscal transfer ratio and the environment. Findings demonstrate that intergovernmental fiscal transfer ratio and environmental pollution have a bell-shaped relationship. We then conduct an empirical investigation of CO₂ emissions with panel data for China’s 30 provinces for the period of 1998–2017 by combining spatial econometric methods. The robust empirical results support the aforementioned theoretical findings. The findings of this work may help the central and provincial governments of China in addressing CO₂ emission problems by using a reasonable intergovernmental fiscal transfer ratio.

Keywords:

• endogenous growth
• intergovernmental fiscal transfers
• CO₂ emissions
• Chinese provinces

JEL Classification:

• H77
• Q53

Acknowledgements

We express our genuine appreciation to the Natural Science Foundation of Jiangsu Province of China (BK20190792) and Innovation and Entrepreneurship Doctoral Program of Jiangsu for supporting this study.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The data are from China Emission Accounts and Datasets.

2 Endogenous growth theory mainly studies the long-term trend of the economy, that is, the growth problem. Its main tool is dynamic optimization, and the Hamiltonian function considers the balance of present and future profits. Therefore, an endogenous growth model provides a reliable method for studying the long-term effects of economic policies.