The impacts of fiscal decentralization on environmental innovation in China

Environmental innovation is the fundamental support for sustainable development. Exploiting Chinese provincial panel data from 2007 to 2017, this study investigates the impacts of fiscal decentralization on environmental innovation. In particular, we discuss the regulating role of government's environmental protection expenditures relying on the mediator effect model. The empirical analyses show that fiscal decentralization cannot only directly promote environmental innovation, but also indirectly weaken environmental innovation through the environmental protection expenditure of the local government. The overall performance is that fiscal decentralization promotes environmental innovation. It is noteworthy that there is regional heterogeneity in the impact of fiscal decentralization on environmental innovation. The impact in the east is significantly higher than in the central and western regions in China.