From Budgets to Biodiversity: How Fiscal Decentralization Shapes Environmental Sustainability in Pakistan

Rafique Ur Rehman Memon () and Farhan Ahmed
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Rafique Ur Rehman Memon: Federal Board of Revenue, Government of Pakistan, Karachi 74000, Pakistan
Farhan Ahmed: Economics & Management Sciences Department, NED University of Engineering & Technology, Karachi 75270, Pakistan

Sustainability, 2025, vol. 17, issue 21, 1-23

Abstract: This research contributes to the continuing discussion on the causes of environmental degradation by investigating the impact of fiscal decentralization on environmental sustainability utilizing four measures of environmental sustainability and three measures of fiscal decentralization. The annual data from WDI, OECD, and Global Footprint Network from 1990 to 2023 is analyzed, and the auto regression distributive lag (ARDL) model is employed to calculate long-run estimates. The findings show that fiscal decentralization, technological innovation, population, and other control variables, such as foreign direct investment and trade openness, play important roles in determining environmental sustainability. Composite fiscal decentralization, expenditure, and revenue decentralization lead to decreased environmental sustainability while technological innovation improves environmental sustainability. Furthermore, population, foreign direct investment, and trade openness also negatively affect environmental sustainability. The findings suggest that more resources should be allocated for research and development to save the environment.

Keywords: fiscal decentralization; population growth; technological innovation; foreign direct investment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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