Fiscal and taxation policies, economic growth and environmental quality: An analysis based on PVAR model

Abstract

Taking the investment in environmental pollution control as the representative of the environmental fiscal policy, taking sewage charge as the representative of the environmental tax policy, using the provincial panel data of China from 2003 to 2015, this paper uses the PVAR model to test the interaction relationship among China's fiscal and taxation policies, economic growth and environmental quality. The results show that there is a long-term interaction among environmental pollution control investment, sewage charge, economic growth and environmental quality, and the variance decomposition results show the contribution degrees of pollution control investment to the industrial "three wastes" emission intensity are 0.6 percent, 46.6 percent and 11.7 percent. The contribution degrees of sewage charge to the industrial "three wastes" emission intensity are 15.5 percent, 70.9 percent and 8.3 percent in turn. The contribution degrees of the economic development level to the industrial "three wastes" emission intensity are 2.5 percent, 7.1 percent and 0.5 percent in turn. The internal mechanism that investment in environmental pollution control and sewage charge first affect economic development and then indirectly affect environmental quality is set up. On this basis, this paper puts forward policy proposals on how to enhance the positive interaction among fiscal and taxation policies, economic growth and environmental quality.