China’s fiscal decentralization and environmental quality: theory and an empirical study

Yu Hao (Lead / Corresponding author), Yu-Fu Chen, Hua Liao, Yi-Ming Wei

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71 Citations (Scopus)
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As a wide-reaching institutional reform, China’s fiscal decentralization was launched in the early 1980s to encourage provincial economic growth by granting more financial autonomy to provincial governments. In this paper, the impact of fiscal decentralization on China’s environmental quality is investigated both theoretically and empirically. A neoclassical model is developed based on the primary characteristics of China’s fiscal decentralization. Using provincial panel data for the period 1995-2015, a two-equation regression model is employed to empirically verify the three propositions of the theoretical model: 1) there exists an inverted-U shaped relationship between fiscal decentralization and GDP per capita; 2) fiscal decentralization is positively related to GDP per capita at the steady state; 3) there is an inverted-U shaped Environmental Kuznets Curve relationship between pollution emissions and economic growth.
Original languageEnglish
Pages (from-to)159-181
Number of pages23
JournalEnvironment and Development Economics
Issue number2
Early online date2 Sept 2019
Publication statusPublished - Apr 2020


  • China
  • economic growth
  • environmental quality
  • fiscal decentralization
  • panel data

ASJC Scopus subject areas

  • Development
  • Environmental Science(all)
  • Economics and Econometrics


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