Nature Environment and Pollution Technology

Xiaoyu Ma ¹, Lei Bi ², Zhan-Ao Wang ¹

Affiliations
1 City College of Wenzhou University, Wenzhou city, Zhejiang province, 325035, CN
2 Beijing Normal University Zhuhai, Zhuhai city, Guangdong province, 519000, CN

Abstract

The economic transition in China has caused serious air pollution problems despite the rapid economic growth it promotes. Analysis of the air pollution status in 31 provinces in China indicated that positive measures of provincial fiscal investment in environmental protection could relieve the progressive deterioration of financial mechanisms induced by environmental pollution and significantly improve air quality. In this study, a sharp regression discontinuity model was established in accordance with air pollution index (API) grading rules. The model simulated the relationship between API and provincial fiscal investment based on API data obtained from 31 provinces in China from 2001 to 2014. The influence of air pollution on local investments in environmental protection was analysed using the proposed model. The effects of control variables (population density, GDP per capita, proportions of the secondary and tertiary industries, and fixed-asset investment scale) on fiscal investment and robustness of air pollution were subsequently analysed using the McCrary test. Results show that mild air pollution can decrease the proportion of expenditures allocated for environmental protection; however, this effect is not observed under heavy air pollution. Moreover, the "inverse adjustment" response of local government expenditures on environmental protection to air pollution and expenditure proportion allocated for the environmental protection of economically developed provinces shows no discontinuity effect. Meanwhile, the non-model provinces of environmental protection exhibit significant negative discontinuity effect. This study also suggested measures on how Chinese provincial governments can formulate appropriate incentive and constraint mechanisms for air environmental protection, as well as maintain and increase local government investment towards environmental protection. The conclusions obtained in this study can provide practical significance to fully comprehend the heterogeneity in air pollution control of 31 Chinese provinces.

Keywords

Air Pollution, Fiscal Investment, Environmental Protection API.

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