How Does Urban Expansion Affect Regional Haze Pollution: An Intergovernmental Tax Competition Perspective

ABSTRACT This paper utilizes geographic and nighttime light data to identify the levels of haze pollution and the extent of urban spatial expansion across Chinese provinces, thus partially addressing measurement errors in the variables. Building upon this, the paper incorporates local government tax competition, urban expansion, and regional haze pollution into a unified research framework. Using dynamic spatial panel data from 30 provinces in mainland China for the period 2007–2020, the paper systematically and comprehensively investigates the interrelationships among these factors and delves into their underlying causes and mechanisms. The main findings are as follows: The intergovernmental competition driven by economic growth demands and fiscal incentives has given rise to tax competition and urban expansion among local governments, both of which are key contributors to haze pollution within their jurisdictions. In this process, tax competition further amplifies the adverse impact of urban expansion on environmental quality. Specifically, tax competition leads to a decline in the efficiency of environmental regulations and an increase in industrial pollution, while urban expansion exacerbates pollution emissions from urbanization, transportation, and the construction sector, ultimately resulting in a deterioration of regional air quality.