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Impacts of dual decentralization on green total factor productivity: evidence from China’s economic transition

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China’s fiscal decentralization has the dual characteristics of revenue decentralization and expenditure decentralization, and their impacts on green total factor productivity are also different. By calculating the Malmquist-Luenburger index and using the Spatial Durbin Model, this study examines the effects of dual decentralization on green total factor productivity (GTFP) from the perspective of fiscal competition. It was found that revenue decentralization significantly hindered the improvement of a local area’s GTFP, and that the impact of fiscal revenue competition on a local area’s GTFP is also significantly negative. The expenditure decentralization and the fiscal expenditure competition among different areas are conducive to improving the local area’s GTFP. Moreover, the impact of revenue decentralization on efficiency improvement is significantly negative, while the expenditure decentralization is conducive to technical progress. All these findings may provide enlightenment for optimizing China’s fiscal decentralization and promoting high-quality economic development.

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  1. 1.

    Source: China Statistical Yearbook.

  2. 2.

    Source: Report of the 19th National Congress of the Communist Party of China.

  3. 3.

    TFP mainly reflects the ratio of total output to real input of all production factors in the process of economic growth. Here, total output mainly refers to economic output (such as GDP), and input factors include labour and capital. However, GTFP includes the environmental benefits in the process of economic growth, and the total outputs include not only the economic output, but also the environmental output (the undesired output mentioned later, such as environmental pollution), the input factors include not only the labour and capital, but also the energy. Therefore, compared with TFP, GTFP comprehensively considers the dual constraints of economic growth and environmental quality, and the calculation results are more targeted, more accurate, and more practical.

  4. 4.

    Limited to space, we do not introduce the decomposition process of the direct effect and indirect effect in detail here. The specific content can refer to the Lesage and Pace (2009).

  5. 5.

    It should be noted that θ in Eq. (2) is used to represent fiscal competition, its economic meaning is consistent with the indirect effect here. But the indirect effect is the “net effect” after decomposition with the partial differential method. Therefore, we also report the results of θ and indirect effects.

  6. 6.

    In terms of the research method selection, compared with the SFA (Stochastic Frontier Analysis method), the DEA is based on the linear programming analysis method, which does not need to set the form of production function subjectively, and avoids the measurement error caused by subjectivity. Therefore, this study uses the DEA method to calculate the ML index considering undesired output, and to measure GTFP.

  7. 7.

    In later robustness test, we will measure the ML index based on the variable returns to scale again.

  8. 8.

    “The first law of geography” refers to the fact that any economic thing is related to the other things, and things closer in distance are always more intimate than the things in a far distance (Tobler 1970).


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This work was supported by the National Natural Science Foundation of China [Grant No.71573138]; the National Natural Science Foundation of China [Grant No.71874084]; and the Postgraduate Research & Practice Innovation Program of Jiangsu Province [Grant No. KYCX19_0709].

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Correspondence to Yuanchao Bian.

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Song, K., Bian, Y., Zhu, C. et al. Impacts of dual decentralization on green total factor productivity: evidence from China’s economic transition. Environ Sci Pollut Res (2020).

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  • Dual decentralization
  • Green total factor productivity
  • Fiscal competition
  • Spatial Durbin Model