Race to Top or Race to Bottom Approach: Disaggregated Effect of Fiscal Decentralization and Its Implications for Consumption-Based Carbon Emissions

Muhammad Tufail (), Lin Song (), Weizheng Wang (), Xiao Gu () and Salahuddin Khan ()
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Muhammad Tufail: Xian Jiaotong University
Lin Song: Xian Jiaotong University
Weizheng Wang: Chinese Academy of Agricultural Sciences
Xiao Gu: Communication University of Zhejiang
Salahuddin Khan: King Saud University

Journal of the Knowledge Economy, 2024, vol. 15, issue 3, No 190, 15243-15277

Abstract: Abstract Fiscal decentralization is a growing area of research, particularly for reducing carbon emissions and promoting environmental sustainability. However, its contribution to decreasing consumption-based carbon emissions remains relatively unexplored. Unlike previous studies, the current study explores the effect of expenditure and revenue decentralization on consumption-based carbon emission along with control variables such as exports, imports, human capital, globalization, renewable energy, and economic growth for BRICS economies from 1990 to 2020. The quantile regressions via method of moments test is employed to investigate the long-run relationship among the study variables. To enhance the robustness of the analysis this study also utilizes bootstrapped quantile regression and simple quantile regression tests. The results of quantile regressions via method of moments reveal that revenue decentralization increases consumption-based carbon emissions while expenditure decentralization reduces it. Moreover, it is worth noting that exports reduce while imports increases consumption-based carbon emissions in BRICS nations. Remarkably human capital, globalization, and renewable energy consumption have played pivotal roles in promoting environmental sustainability. However, the rapid pace of economic growth hurts the environment. This study holds substantial policy implications as it underscores the potential effectiveness of government measures aimed at improving environmental quality when these responsibilities are decentralized to the local population of the given state.

Keywords: Expenditure decentralization; Revenue decentralization; Consumption-based carbon emissions; MMQR approach; BRICS economies (search for similar items in EconPapers)
JEL-codes: C21 F64 H5 H71 Q01 Q5 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-023-01690-2

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