Environmental Quality Optimization and Fiscal Decentralization: An Expanded Endogenous Growth Model

Abstract

The research focuses on China's environmental quality and economic system. Using the endogenous growth model and Davoodi & Zou model, a four-sector endogenous growth model with variables of ecological environment and fiscal decentralization is constructed and the static and dynamic panel models are further constructed. The conclusions are as follows: Fiscal decentralization and tax burden have non-linear effects on environmental quality;Fiscal decentralization and tax burden have a deteriorating effect on environmental quality while the synergy of the two produces a dilution effect that weakens each other; Environmental quality itself has lagged effect. Therefore, it is proposed to coordinate and consist the fiscal decentralization and tax system and cultivate innovation capabilities, reduce unit energy consumption.