Effects of One-Sided Fiscal Decentralization on Environmental Efficiency of Chinese Provinces

Hang Xiong ()

No 201208, Working Papers from CERDI

Abstract: China’s actual fiscal decentralization is one-sided: while public expenditures are largely decentralized, fiscal revenues are recentralized after 1994. One critical consequence of the actual system is the creation of significant fiscal imbalances at sub-national level. This paper investigates empirically effects of fiscal imbalances on environmental performance of Chinese provinces. First, environmental efficiency scores of Chinese provinces are calculated with SFA for the period from 2005 to 2010. Then, these scores are regressed against two fiscal imbalance indicators in a second stage model. Finally, conditional EE scores are calculated. This paper finds that effects of fiscal imbalances on EE are nonlinear and conditional on economic development level. Fiscal imbalances are more detrimental to environment in less developed provinces. These results suggest that the one-sided fiscal decentralization in China may have regressive environmental effects and contribute to regional disparity in terms of sustainable development.

Keywords: Chinese provinces, Decentralization; Environmental efficiency; SFA (search for similar items in EconPapers)
JEL-codes: H70 Q56 R51 (search for similar items in EconPapers)
Pages: 32
Date: 2012
New Economics Papers: this item is included in nep-env, nep-geo, nep-pbe, nep-tra and nep-ure
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