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- Title
Governments' Fiscal Squeeze and Firms' Pollution Emissions: Evidence from a Natural Experiment in China.
- Authors
Kong, Dongmin; Zhu, Ling
- Abstract
We investigate whether and how government fiscal squeeze affects local firms' pollution emissions. To establish causality, we introduce a policy shock in China, namely, the canceling of agricultural taxes in 2005, to document that governments' fiscal squeeze due to sudden tax decreases substantially increases local firms' emission by approximately 4%. Mechanism analyses show that local fiscal squeeze result in aggravating pollution emissions through inducing the reduction of firms' efforts on green innovation and abatement activities. Cross-sectionally, the effects of local government fiscal squeeze on pollution emissions are mitigated by environmental regulation, marketization development, but strengthened by firm financial pressure.
- Subjects
CHINA; EMISSIONS (Air pollution); AGRICULTURAL taxes; FINANCIAL stress; ENVIRONMENTAL regulations; BUSINESS enterprises; TECHNOLOGICAL innovations; AGRICULTURAL innovations
- Publication
Environmental & Resource Economics, 2022, Vol 81, Issue 4, p833
- ISSN
0924-6460
- Publication type
Article
- DOI
10.1007/s10640-022-00656-3