Heliyon (Mar 2024)
The impact and mechanism of vertical fiscal imbalance on green development efficiency: An empirical analysis based on city-level samples in China
Abstract
Green development has become a prevalent theme due to the tightening of resource constraints. This article explores the institutional factors that may contribute to the slow pace of green modernization in prefecture-level cities during the new era through the examination of the central-local fiscal relationship that local governments in China must navigate. A two-way fixed-effects model is used to theoretically analyze the impact of the increase in vertical fiscal imbalance (VFI) on green development efficiency (GDE) based statistical data from 270 cities between 2007 and 2020. The research shows that the increase in VFI has an N-shaped nonlinear effect on GDE, which is supported by various robustness and endogeneity tests. The greening process is significantly affected by the fluctuating dynamics of China's central-local fiscal relations. The VFI values of 0.2801 and 0.8892 are important transition points along the GDE curve, representing its peak and valley, respectively. At the end of the study period, only 12.13% of the studied cities experienced a higher quality facilitation effect. Streamlining the relationship between central and local finance is urgently needed for the widespread implementation of greening. The stock and supply of scientific and technological personnel play crucial roles in shaping the impact of the central-local fiscal relationship on green modernization. Specifically, VFI has an inverted U-shaped nonlinear impact on the level of scientific and technological human resources (S&TL). The inflection point occurs at VFI = 0.2710, which is close to the point of GDE. Furthermore, heterogeneity tests indicate that the institutional dividend of VFI is more pronounced in economically developed regions, eastern coastal areas, and regions with a more developed industrial structure. The study provides valuable insights for the government to promote green development. However, the lack of indicators and specific samples, as well as the reliance on limited assumptions, constrains the ability of this study to draw meaningful research conclusions. These limitations highlight the necessity for further related research in the future.
