Social Sciences in China (Chinese Edition)

No.8, 2020

 

Financial Rules and the Construction of National Governance Capacity—As Seen in Environmental Control

(Abstract)

 

Zhang Li

 

Finance is the foundation and one of the important pillars of national governance. Reforming financial rules to enhance national governance capacity is of great policy significance, and environmental control is an important element in the construction of national governance capacity. The hypothesis of the “environmental Kuznets curve” ignores the role of government in environmental improvement, while top-down administrative orders ignore the initiative of local governments. Given local government’s pursuit of the maximization of fiscal revenue, we can put forward a hypothesis of the relationship between fiscal revenue and local governments’ governance performance and test it empirically. The results show that fiscal rules can influence the structure of fiscal revenue and expenditure, allowing us to interpret heterogeneous environmental governance incentives in different areas. In this way, the reform of fiscal rules can promote the improvement of national governance capacity, and the central government can encourage local governments to take autonomous responsibility for environmental control by changing fiscal rules.