{"id":1310,"date":"2021-02-11T18:13:21","date_gmt":"2021-02-11T10:13:21","guid":{"rendered":"http:\/\/peng.baiji.org.cn\/?p=1310"},"modified":"2021-02-11T18:16:09","modified_gmt":"2021-02-11T10:16:09","slug":"the-short%e2%80%91run-effect-of-a-local-fiscal-squeeze-on-pollution-abatement-expenditures-evidence-from-chinas-vat-pilot-program","status":"publish","type":"post","link":"https:\/\/peng.baiji.org.cn\/?p=1310","title":{"rendered":"The Short\u2011Run Effect of a Local Fiscal Squeeze on Pollution Abatement Expenditures: Evidence from China\u2019s VAT Pilot Program"},"content":{"rendered":"<p><strong>Fei Peng \u00b7 Langchuan Peng \u00b7 Jie Mao \u00b7 Peng Lu<\/strong><\/p>\n<p>&nbsp;<\/p>\n<p><strong>Abstract<\/strong><\/p>\n<p>Introduced in 2012, China\u2019s value-added tax (VAT) pilot program gradually replaced business tax (BT) with VAT. It has created a large fiscal squeeze for the local government since 75% of VAT revenue goes to the central government. Employing a diference-in-diferences estimator with continuous treatment intensity, we find that this fiscal squeeze has a negative effect on pollution abatement expenditures. Moreover, private firms in eastern regions are less responsive to this shock than those in the rest of China due to having better regulated local governments. We also find that this effect is smaller in magnitude if the firm owner is younger, more educated or has industrial and political connections compared to her respective counterparts. This fiscal squeeze reduces pollution abatement expenditures more in regions with higher fiscal stress, looser environmental regulation, and lower pollution abatement costs. Further exploration shows that, in response to this fiscal squeeze, local governments have adopted several tools to compensate for revenue loss, including increasing tax enforcement and loosening environmental regulation.<\/p>\n<p><strong>Keywords<\/strong> VAT pilot program \u00b7 Pollution abatement expenditure \u00b7 Tax burden \u00b7 Environmental regulation<\/p>\n<p>&nbsp;<\/p>\n<p>Peng, F., Peng, L., Mao, J. Lu, P. 2021. \u201cThe Short-Run Effect of a Local Fiscal Squeeze on Pollution Abatement Expenditures: Evidence from China\u2019s VAT Pilot Program\u201d.\u00a0<em>Environment Resource Economy<\/em>. https:\/\/doi.org\/10.1007\/s10640-021-00539-z<\/p>\n<p>&nbsp;<\/p>\n<p>Download link: <a href=\"http:\/\/peng.baiji.org.cn\/wp-content\/uploads\/sites\/2\/2021\/02\/Fei-Peng-Langchuan-Peng-Jie-Mao-Peng-Lu-2021-Environmental-and-Resource-Economics.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">The Short\u2011Run Effect of a Local Fiscal Squeeze on Pollution Abatement Expenditures: Evidence from China\u2019s VAT Pilot Program<\/a><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignleft wp-image-1312\" src=\"http:\/\/peng.baiji.org.cn\/wp-content\/uploads\/sites\/2\/2021\/02\/template_10640_Cover-1-675x1024.png\" alt=\"\" width=\"400\" height=\"607\" srcset=\"https:\/\/peng.baiji.org.cn\/wp-content\/uploads\/2021\/02\/template_10640_Cover-1-675x1024.png 675w, https:\/\/peng.baiji.org.cn\/wp-content\/uploads\/2021\/02\/template_10640_Cover-1-198x300.png 198w, https:\/\/peng.baiji.org.cn\/wp-content\/uploads\/2021\/02\/template_10640_Cover-1-768x1165.png 768w, https:\/\/peng.baiji.org.cn\/wp-content\/uploads\/2021\/02\/template_10640_Cover-1.png 827w\" sizes=\"(max-width: 400px) 100vw, 400px\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduced in 2012, China\u2019s value-added tax (VAT) pilot program gradually replaced business tax (BT) with VAT. It has created a large fiscal squeeze for the local government since 75% of VAT revenue goes to the central government. Employing a diference-in-diferences estimator with continuous treatment intensity, we find that this fiscal squeeze has a negative effect on pollution abatement expenditures&#8230;<\/p>\n","protected":false},"author":1,"featured_media":1311,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[38],"tags":[],"_links":{"self":[{"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/posts\/1310"}],"collection":[{"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1310"}],"version-history":[{"count":3,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/posts\/1310\/revisions"}],"predecessor-version":[{"id":1315,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/posts\/1310\/revisions\/1315"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=\/wp\/v2\/media\/1311"}],"wp:attachment":[{"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/peng.baiji.org.cn\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}