The Impact of Economic Growth Target Constraints on Environmental Pollution: Evidence from China

Abstract

Economic growth target (EGT) has become an essential tool for macroeconomic administration all around the world. This study examines the effect and mechanisms of EGT on environmental pollution (EP) by using economic growth target data from provincial Government Work Reports in China from 2003–2019. The conclusions denote that EGT significantly aggravates regional EP, and it still stands after robustness tests and instrumental variable (IV) estimation. The result of mediating effect shows that EGT aggravates EP mainly from three ways: investment surge, technological innovation, and resource allocation. The result of the moderating effect shows that government’s fiscal space positively adjusts the effect of EGT on EP, while environmental regulation negatively adjusts the effect of EGT on EP. The heterogeneity test reflects that the effect of EGT on EP is more significant on provinces that adopt a “hard constraint” setting method and fulfill EGT. Our study provides a reference to better balance the link between EGT and sustainable development for the government department.