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Reform of government level and local environmental pollution: evidence from China

Author

Listed:
  • Jingyuan Yu

    (Guangdong University of Finance and Economics)

  • Shuai Chen

    (Guangdong University of Finance and Economics)

  • Linmu Li

    (Guangdong University of Finance and Economics)

Abstract

In this study, the effect of a fiscal reform of government level implemented in China on enterprise pollution emissions is estimated, using data from the Chinese polluting enterprise database. The results provide strong evidence that fiscal decentralization decreases environmental quality as measured by a comprehensive indicator composed of wastewater, waste gas, and waste solids. Compared to non-province-managing-counties in province-managing counties, corporate pollution has increased by 3.4%, especially in companies owned by cities and counties and in companies that belong to low-pollution industries and are facing financial constraints. This shows that, although the PMC reform enhanced the provision of environmental public goods by local governments, it also strengthened the race to the bottom caused by interjurisdictional competition. Therefore, the total effect of the PMC reform on pollution is positive. This suggests that relying solely on fiscal decentralization cannot effectively improve environmental quality. Higher-level governments should design a more effective incentive mechanism to decrease enterprise emissions.

Suggested Citation

  • Jingyuan Yu & Shuai Chen & Linmu Li, 2025. "Reform of government level and local environmental pollution: evidence from China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(2), pages 3609-3628, February.
    • Handle: RePEc:spr:endesu:v:27:y:2025:i:2:d:10.1007_s10668-023-04032-z
    DOI: 10.1007/s10668-023-04032-z
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    More about this item

    Keywords

    Reform of government level; Environmental quality; Province-managing-county; Differences-in-differences;
    All these keywords.

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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