Does Fiscal Decentralization Drive CO 2 Emissions? A Quantile Regression Analysis

Wilman Gustavo Carrillo-Pulgar (), Juan Pablo Vallejo-Mata (), Katherine Gissel Tixi-Gallegos, Patricio Alejandro Sánchez Cuesta and Josué Romero-Alvarado
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Wilman Gustavo Carrillo-Pulgar: Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo (UNACH), Riobamba 060101, Ecuador
Juan Pablo Vallejo-Mata: Faculty of Graduate Studies, Universidad Estatal de Milagro (UNEMI), Milagro 091706, Ecuador
Katherine Gissel Tixi-Gallegos: Faculty of Sciences, Escuela Superior Politécnica de Chimborazo (ESPOCH), Riobamba 060101, Ecuador
Patricio Alejandro Sánchez Cuesta: Department of Economics, Faculty of Political and Administrative Sciences, Universidad Nacional de Chimborazo (UNACH), Riobamba 060101, Ecuador
Josué Romero-Alvarado: Faculty of Graduate Studies, Universidad Estatal de Milagro (UNEMI), Milagro 091706, Ecuador

JRFM, 2025, vol. 18, issue 5, 1-22

Abstract: Achieving sustainable models is a crucial challenge today, where government actions play a fundamental role. Therefore, this study aims to analyze the impact of fiscal decentralization on CO 2 emissions in 40 economies between 2000 and 2020. To this end, an unbalanced panel was constructed, and the Method of Moments Quantile Regression (MMQR) was employed. As a robustness check, Driscoll and Kraay’s standard errors approach was used. The MMQR results indicate that fiscal decentralization has a positive and significant effect across all quantiles of CO 2 emissions. Additionally, it was found that revenue-side decentralization has a greater impact on the lower quantiles of CO 2 emissions, while expenditure-side decentralization has a stronger effect on the upper quantiles. The findings also reveal that renewable energy mitigates CO 2 emissions, whereas economic growth, resource rents, and information and communication technologies increase them, although the latter with lower statistical significance. These findings are expected to serve as a basis for public policy formulation aimed at improving environmental quality.

Keywords: fiscal decentralization; CO 2 emissions; economic growth; MMQR (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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