Carbon mitigation performance of top-down administrative and fiscal decentralizations: Evidence from quasi-natural experiments in China's pilot counties

Chinese-style decentralization reform not only creates miracles of economic growth, but also brings many unexpected gains, the most prominent of which are environmental externalities. The aim of this paper is to use the quasi-natural experiments of county-level administrative decentralization and fiscal decentralization reforms to study their heterogeneous effects on regional carbon emissions in the difference-in-difference framework. We selected the pilot counties as the treatment group from the full sample of 1981 counties during the period 1997-2017. The results show that the parallel trend test provides the empirical premise of the quasi-natural experiment. Due to the consistent estimation of instrumental variable estimation and PSM-DID methods, the average treatment effect of carbon emissions of the two kinds of decentralization reforms and their mixed reform pilots was obtained robustly. Consequently, the fiscal decentralization promotes carbon emission reduction, while administrative decentralization has insignificant effect. The mixed pilot counties that have carried out both administrative decentralization and fiscal decentralization reforms could usher in enhanced carbon reductions. To achieve more environmental benefits, policymakers need to further strengthen the coordination of county-level administrative and fiscal decentralization reforms.