Strategic Interaction in Spending on Environmental Protection: Spatial Evidence from Chinese Cities

Abstract

In China, the responsibility of protecting the environment lies largely with local governments.Within the framework of spatial econometrics, we investigate empirically the consequence of such an institutional setting. Using city-level data for China, the present study finds that city governments behave strategically in making spending decisions regarding environmental protection. This paper finds that a city government appears to cut its own spending as a response to the rise in environmental protection spending by its neighbors. Hence, environmental protection tends to be underprovided. As a result, we suggest that centralizing the environmental protection responsibility to a higher level of government would be beneficial in terms of controlling pollution in China.

Spatial spillovers in public expenditure on a municipal level in Spain

“…These spending policies and their spatial spillovers have generated special interest for investigators. For example, some studies have analysed the total expenditure of local governments (Case et al 1993;Solé-Ollé 2006) and others analyse specific items: Culture (Lundberg 2006;Werck et al 2008;St'astná 2009;Benito et al 2013), Sport and recreational activities (St'astná 2009; Ermini and Santolini 2010), Security (Schaltegger and Zemp 2003), Rescue Services (Hanes 2002) or Environment (St'astná 2009;Ermini and Santolini 2010;Deng et al 2012;Choumert and Cormier 2011). All these papers propose different models to explain per capita public expending using spatial econometrics models in order to capture spatial spillovers in the regression model (Anselin 1988).…”

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