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The Relationship between Fiscal Federalism and CO2 emissions in China

Hector, Jeremia LU (2017) NEKN03 20172
Department of Economics
Abstract
The decentralization of fiscal responsibilities in China has strengthened economic
development and enhanced local public management. However, due to fiscal competition,
local governments that are fiscally constrained tend to neglect environmental standards in
favour of economic growth. This study researches how outcomes of fiscal federalism in
China, measured by budgetary ratios of gross regional products, relate to environmental
diversities between provinces, measured by CO2 emission intensity. A panel dataset including
30 Chinese provinces between 2003 and 2015 is empirically tested with fixed-effect method.
Test results reveal that provinces with high ratio of revenues have higher CO2 intensity the
same year but lower CO2... (More)
The decentralization of fiscal responsibilities in China has strengthened economic
development and enhanced local public management. However, due to fiscal competition,
local governments that are fiscally constrained tend to neglect environmental standards in
favour of economic growth. This study researches how outcomes of fiscal federalism in
China, measured by budgetary ratios of gross regional products, relate to environmental
diversities between provinces, measured by CO2 emission intensity. A panel dataset including
30 Chinese provinces between 2003 and 2015 is empirically tested with fixed-effect method.
Test results reveal that provinces with high ratio of revenues have higher CO2 intensity the
same year but lower CO2 intensity the second year. Results also show that provinces with
high expenditure ratios have lower CO2 intensity. However, provinces with high deficit ratio
exhibit lower CO2 intensity. The overall results indicate that the relationship between the
budgetary sizes of provinces and decentralized management of environmental protection is
contradictory. This may relate to the exclusion of central-to-local transfers and off-budgetary
sources, which vary between provinces and potentially affect the relationship. The study
determines that the relationship between provincial fiscal diversities and CO2 intensity
diverges in China depending on which of revenues, expenditures or deficits that is used as a
fiscal proxy. (Less)
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author
Hector, Jeremia LU
supervisor
organization
course
NEKN03 20172
year
type
H1 - Master's Degree (One Year)
subject
keywords
Decentralization, Inter-jurisdictional competition, Fiscal disparities, Environmental protection, CO2 intensity
language
English
id
8927443
date added to LUP
2017-11-01 11:55:11
date last changed
2017-11-01 11:55:11
@misc{8927443,
  abstract     = {The decentralization of fiscal responsibilities in China has strengthened economic
development and enhanced local public management. However, due to fiscal competition,
local governments that are fiscally constrained tend to neglect environmental standards in
favour of economic growth. This study researches how outcomes of fiscal federalism in
China, measured by budgetary ratios of gross regional products, relate to environmental
diversities between provinces, measured by CO2 emission intensity. A panel dataset including
30 Chinese provinces between 2003 and 2015 is empirically tested with fixed-effect method.
Test results reveal that provinces with high ratio of revenues have higher CO2 intensity the
same year but lower CO2 intensity the second year. Results also show that provinces with
high expenditure ratios have lower CO2 intensity. However, provinces with high deficit ratio
exhibit lower CO2 intensity. The overall results indicate that the relationship between the
budgetary sizes of provinces and decentralized management of environmental protection is
contradictory. This may relate to the exclusion of central-to-local transfers and off-budgetary
sources, which vary between provinces and potentially affect the relationship. The study
determines that the relationship between provincial fiscal diversities and CO2 intensity
diverges in China depending on which of revenues, expenditures or deficits that is used as a
fiscal proxy.},
  author       = {Hector, Jeremia},
  keyword      = {Decentralization,Inter-jurisdictional competition,Fiscal disparities,Environmental protection,CO2 intensity},
  language     = {eng},
  note         = {Student Paper},
  title        = {The Relationship between Fiscal Federalism and CO2 emissions in China},
  year         = {2017},
}