Does decentralization improve natural resources and government efficiency?

Peijun Xie, Wenhui Xiao, Yifan Cai and Zili Zhu

Resources Policy, 2024, vol. 91, issue C

Abstract: The importance of natural resource efficiency has not been explored much in the literature. The novel idea of incorporating the role of financial inclusion and fiscal decentralization in emerging economies regarding environmental sustainability and sustainable development is lacking. This study scrutinizes factors such as financial inclusion and fiscal decentralization impact on CO2 emissions in top emerging economies from 2004 to 2022 to fill this gap. The research encompassed economic expansion, renewable electricity, and oil rents as controlled variables. This research employed novel moments and methods of quantile regression as primary estimation techniques along with bootstrap quantile regression to check its robustness. For the panel causality, the Dumitrescu Hurlin test is used. We infer from the estimations that fiscal decentralization increases by 1% will lead to rise in CO2 emissions with the coefficients of 1.9% in lower and 2.2% in the higher quantiles. This suggests the magnitude of increasing the effect of fiscal decentralization from the lower to higher quantiles. Moreover, financial inclusion also causes environmental degradation with coefficients of 0.19%, 0.29%, 0.38%, and 0.42% respectively in most of the quantiles. The robustness of our estimations provides similar and robust outcomes. In terms of policy implications, emerging economies should focus on financial reforms, focus on cleaner energy projects through the financial system, and enhance the effectiveness of fiscal decentralization for environmental sustainability.

Keywords: Financial inclusion; Natural resources efficiency; Fiscal decentralization; Emerging economies; MMQREG (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:91:y:2024:i:c:s0301420724002320

DOI: 10.1016/j.resourpol.2024.104865

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