Fiscal Decentralization and County Natural Poverty: A Multidimensional Study Based on a BP Neural Network

Bo Wang and Wanrong Deng ()
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Bo Wang: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China
Wanrong Deng: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2023, vol. 15, issue 18, 1-27

Abstract: To achieve the goal of long-term stable poverty reduction, it is necessary to implement not only economic poverty reduction but also natural poverty reduction and formulate a green and sustainable economic growth pattern, and finance is an effective means to affect economic poverty reduction and natural poverty reduction. This paper innovatively calculates the natural poverty index of 1712 county administrative units in China based on BP neural network and combines relevant county data to investigate the impact of county fiscal decentralization on natural poverty and its transmission mechanism from 2000 to 2020 using a two-way fixed-effect model, which provides a new interpretation perspective for green economy patterns and sustainable development. The main research results are as follows: First, the increase in county-level financial autonomy in China significantly increases the level of regional natural poverty, which is still valid after a series of robustness tests using the instrumental variable method, replacing the response variables and processing with a one-stage lag. Secondly, heterogeneity analysis shows that, on the one hand, the positive impact of county-level fiscal decentralization on the natural poverty index is different in regions with different natural poverty formation mechanisms. On the other hand, the reform of “provincial direct management of counties” has significantly improved the natural poverty situation in counties, indicating that an extensive fiscal and taxation system in the early stages of economic development aggravates regional natural poverty and that optimized fiscal decentralization is conducive to the alleviation of natural poverty. Finally, the mechanism analysis found that the local income impact and expenditure preference accompanied by the fiscal decentralization of counties strengthened the race to the bottom of taxation, guided industrialization, hindered technological progress and led to the deterioration of regional natural poverty. This research claims that encouraging local governments to deepen and improve the fiscal decentralization system, implement the concept of green finance, improve the ecological protection compensation mechanism and market incentive system and implement differentiated mitigation plans for different natural poverty counties are the crucial factors to achieving natural poverty alleviation at the county level and improving regional ecological sustainability in the future.

Keywords: fiscal decentralization; natural poverty; green and sustainable development; BP neural network (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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