Effects of FDI on the Efficiency of Government Expenditure on Environmental Protection Under Fiscal Decentralization: A Spatial Econometric Analysis for China

Jie Zhang, Yinxiao Qu, Yun Zhang, Xiuzhen Li and Xiao Miao
Additional contact information
Jie Zhang: School of Business, Hohai University, West Focheng Road 8, Nanjing 211100, China
Yinxiao Qu: School of Business, Hohai University, West Focheng Road 8, Nanjing 211100, China
Yun Zhang: School of Finance, Shanghai Lixin University of Accounting and Finance, Shanghai 201620, China
Xiuzhen Li: School of International Economy and Trade, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China
Xiao Miao: Innovation Research Institute of Traditional Chinese Medicine, Shanghai University of Traditional Chinese Medicine, Shanghai 201203, China

IJERPH, 2019, vol. 16, issue 14, 1-19

Abstract: Most governments strive for an ecological civilization so the efficiency of government expenditure on environmental protection (EPEE) is an important issue. While it is recognized that foreign direct investment (FDI) enhances environmental protection, this investigation focuses on the effects of FDI on the efficiency of government expenditure on environmental protection under fiscal decentralization. Analysis is conducted using an output-oriented data envelopment analysis (DEA) scale return model to calculate the efficiency of environmental protection spending in China. Then, a spatial model is built to test the linkages among FDI, fiscal decentralization and the efficiency of government expenditure. The results reveal that, firstly, the efficiency of government spending has been enhanced over the last 10 years. Secondly, FDI is positively correlated with the efficiency of government environmental expenditure in terms of both quantity and quality of spending and it has a positive spillover effect. Thirdly, financial decentralization is negatively correlated with the efficiency of environmental spending, but it improves the effect of FDI. Accordingly, policy proposals are that the government should improve the supervision system for environmental spending and local governments should pursue FDI, improve the structure of FDI and use its spillover effect to enhance the efficiency of environmental expenditure.

Keywords: foreign direct investment; fiscal decentralization; efficiency of government expenditure on environmental protection; spatial model; spillover effect (search for similar items in EconPapers)
JEL-codes: I I1 I3 Q Q5 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://www.mdpi.com/1660-4601/16/14/2496/pdf (application/pdf)
https://www.mdpi.com/1660-4601/16/14/2496/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jijerp:v:16:y:2019:i:14:p:2496-:d:248000

Access Statistics for this article

IJERPH is currently edited by Ms. Jenna Liu

More articles in IJERPH from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().