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Neighbor-Companion or Neighbor-Beggar? Estimating the Spatial Spillover Effects of Fiscal Decentralization on China’s Carbon Emissions Based on Spatial Econometric Analysis

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  • Xianpu Xu

    (School of Business, Xiangtan University, Xiangtan 411105, China)

  • Shan Li

    (School of Business, Xiangtan University, Xiangtan 411105, China)

Abstract

China’s rapid economic growth is associated with huge energy consumption and high carbon dioxide (CO 2 ) emissions. Although the environmental effect of fiscal decentralization (FD) has been widely reported, its impact on CO 2 is still a controversial subject. In this context, based on the panel data for China’s 30 provinces during 2003–2019, this paper uses a spatial autoregressive model to investigate the spatial spillover effects of revenue and expenditure decentralization on CO 2 emissions, respectively. The results show that: (1) CO 2 emissions exhibit spatial dependence, indicating that the rise of CO 2 emissions in the region can lead to the rise of it in neighboring regions. (2) Both revenue and expenditure decentralization have significant positive spatial spillover effects on CO 2 emissions, implying that higher FD in the province can significantly accelerate CO 2 emissions in neighboring provinces. (3) There exists regional heterogeneity in the spatial spillover effect of FD on CO 2 emissions. (4) Foreign direct investment (FDI) and technological innovation (R&D) can effectively mitigate the adverse effect of FD on CO 2 emissions. (5) Industrial structure and human capital can significantly inhibit CO 2 emissions, while economic development cannot. Therefore, it is important to optimize the system of fiscal decentralization and strengthen inter-regional cooperation on carbon emission reduction.

Suggested Citation

  • Xianpu Xu & Shan Li, 2022. "Neighbor-Companion or Neighbor-Beggar? Estimating the Spatial Spillover Effects of Fiscal Decentralization on China’s Carbon Emissions Based on Spatial Econometric Analysis," Sustainability, MDPI, vol. 14(16), pages 1-26, August.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:16:p:9884-:d:884790
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