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Research on Financial Pressure, Poverty Governance, and Environmental Pollution in China

Zenglian Zhang () and Wenju Zhao ()
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Zenglian Zhang: Donlinks School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China
Wenju Zhao: Donlinks School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China

Sustainability, 2018, vol. 10, issue 6, 1-24

Abstract: The traditional environmental governance theory attributes pollution to the result of market failure, but ignores the institution-level factors and the possibility of government failure. Using provincial panel data from 2001 to 2016 in China, and by drawing impulse response function graphs and building PVAR models, this paper studies the financial pressure and poor governance effect on environmental pollution. Financial pressure represents fiscal decentralization and debt pressure. The study finds that the increase of fiscal autonomy brings about the reduction of various types of pollutant emissions; the expansion of the scale of government debt causes very large pressure on the local governments to repay their debts and exacerbates environmental pollution in order to obtain debt repayment funds. For a long time, there was indeed a phenomenon in China in which the goal of reducing poverty was achieved at the cost of the environment. However, since 2012, the reduction of the poverty-stricken population has brought about a good trend of reducing emissions of various types of pollutants. There are no “PPE vicious circles” and “environmental traps” in China. There has been no contradiction between poverty reduction and the green development strategy implementation since 2012. There is a win-win trend in the process of environmental protection and poverty governance in China.

Keywords: environmental pollution; fiscal decentralization; local government debt; poverty governance; PVAR model (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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