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In the published literature,the differences in environmental performance across countriesare typically explained using the Environmental Kuznets Curve.The Environmental KuznetsCurve states that pollution initially increases with economic growth.Once GDP per capitareaches a certain level,the relationship reverses.In the present paper,we provide analternative hypothesis,where budget structure plays an important role in explaining thevariations in pollution across the world:the lower the business-related taxes as a share oftotal tax revenue,the higher the property tax in total tax revenue and the higher the ratio ofpublic health expenditure in total expenditure,then the stronger the incentive of pollutioncontrol and the lower the pollution level.Our empirical findings reveal that the budgetstructure does have an important impact on pollution control.The policy implication of thisresearch is that effective control of environmental pollution requires changes in tax structureand expenditure assignment.This research has important policy implications for China’stax system reform and pollution control efforts.
In the published literature, the differences in environmental performance across countries are typically explained using the Environmental Kuznets Curve. The Environmental Kuznets Curve states that pollution initially increases with economic growth. Once GDP per capitareaches a certain level, the relationship reverses. In the present paper, we provide alternative remedies hypothesis, where budget structure plays an important role in explaining the fluctuations in pollution across the world: the lower the business-related taxes as a share of total tax revenue, the higher the property tax in total tax revenue and the higher the ratio of public health expenditure in total expenditure, then the stronger the incentive of pollutioncontrol and the lower the pollution level.Our empirical findings that the budgetstructure does have an important impact on pollution control.The policy implication of thisresearch is that effective control of environmental pollution requires changes in tax structure and expenditure assignment.This research has important policy implications for China’stax system reform and pollution control efforts.