Revisiting the nexus between fiscal decentralization and CO_(2)emissions in South Africa:fresh policy insights

The argument over fiscal decentralization and carbon dioxide emission(CO_(2))reduction has received much attention.However,evidence to back this claim is limited.Economic theory predicts that fiscal decentralization affects environmental quality,but the specifics of this relationship are still up for debate.Some scholars noted that fiscal decentralization might lead to a race to the top,whereas others contended that it would result in a race to the bottom.In light of the current debates in environmental and development economics,this study aims to provide insight into how this relationship may function in South Africa from 1960 to 2020.In contrast to the existing research,the present study uses a novel dynamic autoregressive distributed lag simulation approach to assess the positive and negative changes in fiscal decentralization,scale effect,technique effect,technological innovation,foreign direct investment,energy consumption,industrial growth,and trade openness on CO_(2)emissions.The following are the main findings:(i)Fiscal decentralization had a CO_(2)emission reduction impact in the short and long run,highlighting the presence of the race to the top approach.(ii)Economic growth(as represented by the scale effect)eroded ecological integrity.However,its square(as expressed by technique effect)aided in strengthening ecological protection,validating the environmental Kuznets curve hypothesis.(iii)CO_(2)emissions were driven by energy utilization,trade openness,industrial value-added,and foreign direct investment,whereas technological innovation boosted ecological integrity.Findings suggest that further fiscal decentralization should be undertaken through further devolution of power to local entities,particularly regarding environmental policy issues,to maintain South Africa’s ecological sustainability.South Africa should also establish policies to improve environmental sustainability by strengthening a lower layer of government and clarifying responsibilities at the national and local levels to fulfill the energy-saving functions of fiscal expenditures.

Foreign direct investment and environmental pollution:A fiscal decentralization perspective

Based on the panel data of 272 prefecture-level cities in China from 2003 to 2017,this study used the comprehensive index of environmental pollution to measure local environmental pollution,and employed the panel simultaneous equation to analyze the relationship between fiscal decentralization,foreign direct investment,and environmental pollution.The results showed that environmental pollution has the characteristics of time inertia and positive spatial spillover;fiscal decentralization and local government competition have a significant“race to bottom”effect on environmental pollution;and with the increase of fiscal decentralization,environmental quality will deteriorate.In the interaction between foreign direct investment and environmental pollution under the system of fiscal decentralization,foreign direct investment aggravates environmental pollution.Meanwhile,if the environmental pollution in a given region is serious,the willingness of foreign investors to invest therein is lessened to a certain extent.Based on the conditions in China,certain policy suggestions are put forward to increase environmental quality,such as building a comprehensive performance assessment mechanism that includes environmental quality,optimizing the decentralization system,and raising the threshold of foreign investment access.

Interprovincial Effects of Fiscal Decentralization on Financial Decentralization in China

By motivating local governments to fight for financial resources,China's tax sharing reform has affected the structure of financial decentralization and inflated local financial systems,thus spawning regional financial risks.Based on theoretical analysis and empirical evidence,this paper has arrived at the following findings:due to different policy objectives,central and local governments exhibit different fiscal and financial behaviors;public finance and financial sector have become financing instruments with certain convertibility under local economic growth framework;fiscal decentralization inevitably affects financial decentralization and lays the foundation for provincial fiscal disparities,resulting in a certain spatial effect of interprovincial fiscal variable;financial explicit centralization/implicit decentralization and fiscal centralization have fueled local competition for financial resources and resulted in correlation between the spatial effects of provincial financial and fiscal variables,and moreover,their mismatch has also spawned fiscal and financial risks on various fronts.Hence,setting clear boundaries of financial centralization and decentralization and ensuring local government fiscal accountability is the key to the prevention and mitigation of fiscal and financial risks in China.

Fiscal Decentralization,Financial Decentralization and Macroeconomic Governance

Improvement of the macroeconomic governance system as an important part of the national governance system is a key initiative to address major economic problems in the new era.The coordination and economic regulatory effects of fiscal and monetary policies are subject to the arrangements of fiscal and financial decentralization systems.Analysis revealed a mismatch between China’s fiscal income decentralization and fiscal spending decentralization,as manifested in the clear decentralization of fiscal revenue and vague decentralization of fiscal spending;in pursuing local economic stability,local governments seek other sources of revenue and compete for financial resources,as manifested in apparent financial centralization and implicit financial decentralization,causing financial decentralization to be inconsistent between various levels of government and between government and the market.The above-mentioned problems are reflected in mutual conversion between public finance and financial intermediation as two financial allocation methods and mutual transmission between fiscal and financial risks,making the case for enhancing coordination between fiscal and monetary policies.In creating a scientific macroeconomic governance system,therefore,we must establish clear local government responsibilities,reduce the proportion of local fiscal spending,clarify the orientations and relief boundary of fiscal and monetary policies,moderately decentralize financial powers,and give better play to the role of local governments in improving the quality of economic development and controlling major risks.

A Study of the Impact of Fiscal Decentralization on the Efficiency of Public Health Expenditure

In this present-day global pandemic that has not been completely resolved,health is a major concern among people,and correspondingly,people are demanding higher standards for public health products and services provided by the government.In this paper,we measure the technical efficiency of public health expenditure in each province by using the data envelopment analysis(DEA)model,and examine the impact of decentralization on the efficiency of public health expenditure under the fiscal decentralization system using the panel data from 31 provinces from 2012-2019 in a panel model subject to fixed effects.

Chinese-Style Fiscal Decentralization and TFP:Race to the Bottom or Race to the Top

This paper reveals the effect of Chinese-style fiscal decentralization on regional total factor productivity(TFP),i.e.,whether it leads to a race to the bottom or a race to the top.Theoretical analysis shows that Chinese-style fiscal decentralizations affects technological progress by changing the conditions of resource allocation.The empirical results show that Chinese-style fiscal decentralization has significantly improved the level of TFP in China,but it also generates the problems of factor mismatch and distortion of fiscal expenditure structure,and cause the distortion of factor market to a certain extent,which is not conducive to technological progress.Based on further observation of the internal composition of TFP,it is concluded that fiscal decentralization has caused technological progress(TP)and technical efficiency(TE)to show a more obvious race to the top,but the race to the top of TFP is weakening.

Measurement index of fiscal decentralization and the revaluation of the economic growth effect

Research on fiscal decentralization is based on the reconstruction of measurement indexes.In view of the combination of fiscal decentralization principles and the reality in China,this paper devises seven measurement indexes of fiscal decentralization,provides empirical analysis of the respective effects on economic growth,and estimates for the economic impact of the fiscal decentralization reform in counties directly administered by provincial governments.This paper gives support to the significance of revenue and expenditure decentralization within the system and gives fiscal autonomous power to the country-level governments.However,the contribution of a fully covered measurement index of fiscal decentralization to economic growth is not ideal.Therefore,there is urgent need to endow county-level governments with financial resources and autonomous power within the current system,to tighten control of their non-budget financing,and to include the counties administered by provincial governments into a new type of fiscal system featuring a match between financial power and responsibility.

Research on the Intergovernmental Fiscal Relations of China in the Past 70 Years:Fiscal Decentralization in Evolution

Since the founding of the People’s Republic of China,the Chinese scholars of finance theory have been sparing no effort on the theoretical research of intergovernmental fiscal relations in the past 70 years,with fiscal decentralization at the core.Although fiscal decentralization has a long history,the intergovernmental fiscal relations which use fiscal decentralization as the vehicle did not constitute an independent research topic in the early days of the People’s Republic of China.Later,fiscal decentralization was adopted and gradually flourished in China,once systematically explained as the target mode of intergovernmental fiscal relations,and even took the form of tax sharing system.In the new era of socialism with Chinses characteristics,the booming research on intergovernmental fiscal relations,adapted to the theoretical innovation of modern fiscal system,has contributed to coping with the changes of international and domestic economic situation in the new normal and to the sustainable fiscal development of China.

Local Government Behavior behind China's Excessive Investment under Decentralization——Theoretical and Empirical Analysis Based on Manufacturing Sector

This paper investigates the effect of local government intervention on capital deepening of manufacturing sector by using interprovincial panel data sets of 28 Chinese provinces,municipalities and autonomous regions between 1994 and 2011.Theoretical research indicates that as a transitional economy,China's local government intervention in corporate investment behaviors will cause excessive investment,thus bringing about a long-term and sustained tendency of capital deepening in manufacturing sector.Empirical test further discovers that in a certain range,the phenomenon of capital deepening in manufacturing sector is not an inevitable result endogenous to economic development and technology progress,and that investment behaviors of manufacturing sector are largely subject to the external institutional environment.Fiscal decentralization has indeed promoted capital deepening of manufacturing sector.Financial credit expansion and interventions in SOEs are major instruments for local governments to intervene in the capital deepening of manufacturing sector and such an influence is particularly significant for China's central,western and northeast regions.Therefore,clarifying government functions and improving local government performance review mechanism are of great significance to the healthy development of China's manufacturing sector.

Impacts of financial decentralization on economic growth and inflation in China

Fiscal decentralization and promotion incentives are main elements that inspire local governments in China to compete for economic growth with each other;but this regime is only part of reason that local governments in China have more effects on economic cycle than their counterparts in other countries.The authors think that financial decentralization should be taken into account.Empirical results indicate that excess financial decentralization would cause high risk of inflation and economic overheating.After tax-sharing reform in 1994,the central government could adjust the boundary of financial decentralization and the local governments may borrow more money during the economic downturn.The authors suggest that a two-tiered financial supervisory system should be set up in the new round of financial reform and financial decentralization should be adjusted to the changing market economy in China.

China’s Inclusive Public Finance System:Based on an Examination of Irregular Revenue

China's achievement of miraculous economic growth is a theoretical proposition that calls for an explanation.The key to understanding the logic of China’s economic reform is a rational explanation of the logical paradox between irregular local finance and the incentive compatibility of central and local governments.Based on the fact that autonomous local financial resources have long been dependent on irregular fiscal revenue,this paper constructs an inclusive public financial system analysis framework from the dual perspectives of the central and local government.This analytical framework offers an explanation of the long-standing implicit fiscal decentralization contract in which irregular fiscal revenue is the carrier in the reform process,together with a description of the central-local interaction process and institutional space underlying the behavioral motivations of central finance tolerance and local financial autonomy.It demonstrates the logical consistency of irregular fiscal revenue,central and local incentive compatibility,economic growth and market-oriented reform.The inclusive public finance system,which takes into account both local dynamism and central control,provides the important institutional logic that has enabled China to reach the dual goals of economic growth and market-oriented reform.