Fiscal Decentralization, Government Environmental Preference and Industrial Green Transformation

Abstract

Based on the theory of fiscal decentralization and sustainable development, and the mechanism analysis about fiscal decentralization and government environmental preference to promote industrial green transformation, using China’s provincial panel data from 2006 to 2019, this paper empirically tests the effect of fiscal decentralization and government environmental preference on industrial green transformation by stepwise regression, threshold effect analysis, and the panel simultaneous equation. Results show that fiscal decentralization promotes industrial green transformation, but it also has a certain inhibitory effect on the government’s environmental preference, which results in an insufficient government role in the process of industrial green transformation. In the long run, the influence of fiscal decentralization and government environmental preference has a threshold effect; also, regional heterogeneity exists, as with regional economic level improvement, the influence became stronger. According to the regional survey, fiscal decentralization has a positive effect on industrial green transformation in the eastern region, while it has no significant effect in the central region and a negative effect in the western region. Therefore, countermeasures are put forward, from aspects such as fiscal decentralization and environmental power structure reform, to optimizing the performance evaluation mechanism for improving the government’s environmental preference, so as to have a positive effect on the green transformation of industries.