Fiscal Decentralization, Environmental Regulation and High-Quality Economic Development

Abstract

Fiscal decentralization, as a policy with which to regulate the financial power relationships between central and local governments, undoubtedly has an impact on high-quality economic development, and in the current context of focusing on environmental quality its path may include environmental regulation, which is restricted by the degree of decentralization and directly affects high-quality economic development. Based on data from 30 Chinese provinces from 2010 to 2019, this paper empirically tests the moderating effect of environmental regulation on the relationship between fiscal decentralization and high-quality economic development through the use of an intermediary-effect model, a threshold model, and a quantile regression model. The following are the main conclusions: First, fiscal decentralization encourages high-quality economic development with a coefficient of 0.069, but environmental regulation dampens this effect, with a coefficient value of 0.0055 for the suppression effect; after removing endogenous effects, the conclusion remains valid. Second, the influence of fiscal decentralization has different manifestations under different environmental regulation intensities and different levels of high-quality economic development: fiscal decentralization has a larger regression coefficient when the intensity of environmental regulation exceeds 0.0108; it only shows a positive effect in regions with a higher quality of economic development (after the 25% quantile). The main contribution of this paper is the discussion of the impact of fiscal decentralization on high-quality economic development from the perspective of environmental regulation and revealing of a new path for fiscal decentralization to play its role, which is of certain significance in exploring the appropriate degree of decentralization and formulating environmental regulation policies.