How do local government fiscal revenue targets affect green technology innovation in China?

ABSTRACTThe process of economic development in China cannot be separated from the ‘shadow’ of government target intervention. Under the Chinese system of fiscal decentralization, constraints created by local government fiscal revenue targets (CCFRTs) will have a series of influence on development economically and socially. Based on the fiscal revenue target data revealed in the government work reports of 281 prefecture-level cities in China from 2006 to 2019, this paper explores the influence of CCFRTs on green technology innovation (GTI). The findings are as follows: first, CCFRTs significantly inhibits GTI. Second, Spatial Durbin model analysis shows that CCFRTs has significant negative spatial spillover effect on GTI. Third, CCFRTs can affect GTI through the optimization of industrial structure, the level of human capital, and the degree of opening-up, technological progress and economic growth. Fourth, CCFRTs has an obvious threshold effect on GTI. Finally, the influence of CCFRTs on GTI has regional heterogeneity in central, eastern and western China. In the western and central regions, CCFRTs significantly restrains GTI significantly, while in the eastern region, CCFRTs significantly promotes GTI.KEYWORDS: Constraints created by local government fiscal revenue targetsgreen technology innovationinfluence mechanismspatial effect AcknowledgmentsThe authors acknowledge financial support from the Special Fund for Joint Development Program of the Beijing Municipal Commission of Education. The usual disclaimer applies. The usual disclaimer applies.Data availability statementThe data are available upon reasonable request.Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 https://www.gov.cn/zhuanti/19thcpc/ (accessed on 6 December 2022).2 http://zhs.mofcom.gov.cn/article/zt_shisiwu/subjectcc/202107/20210703175933.shtml. (accessed on 6 December 2022).3 China operates under a unitary state system characterized by a hierarchical structure of state administration, encompassing five distinct levels: the central government, provincial authorities, municipal entities, county administrations, and township governance. According to China's current system, the national and provincial governments grant prefecture-level governments the authority to set their own fiscal revenue targets. Therefore, each prefecture-level city has its own autonomy in the formulation of fiscal revenue targets, and there is no centralized state intervention. This paper mainly selects fiscal revenue target data at the municipal level for analysis.4 The ‘yardstick effect’ refers to the basis for the assessment and promotion of officials in China's government structure, the possibility of promotion of local governments is getting smaller and smaller under the pyramid-type sector structure. In order to better win the trust and recognition of the superior government and gain promotion, there is a ‘contest’ between governments at the same level. Therefore, in the process of determining the target of fiscal revenue growth, local governments will inevitably be affected by neighboring regions or regions with closer economic development levels, that is, there is a typical feature of ‘yardstick competition’.5 The eastern region of China encompasses twelve provinces, autonomous regions, and municipalities, namely Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Guangxi, and Hainan. The central region comprises ten provinces, autonomous regions, and municipalities, including Shanxi, Inner Mongolia, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, and Chongqing. The western region is composed of nine provinces and autonomous regions, namely Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Ningxia, Qinghai, and Xinjiang.Additional informationFundingThe authors acknowledge financial support from the National Natural Science Foundation of China (72073010), the Science and Technology Program of Shaanxi Province of China (2023-CX-RKX-030), the Social Science Fund of Shaanxi Province (2023D049), the Science and Technology Program of Zhejiang Province of China (2022C35060), the Technology Innovation Program of Beijing Institute of Technology (2022CX01013).