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Testing the Effectiveness of Government Investments in Environmental Governance: Evidence from China

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  • Yiguo Chen

    (Research Institute for Dual Circulation Development of the Greater Bay Area, Guangdong University of Finance & Economics, Guangzhou 510320, China)

  • Peng Luo

    (School of Finance, Hubei University of Economics, No. 8 Yangqiaohu Road, Jiang-Xia District, Wuhan 430205, China)

  • Tsangyao Chang

    (Department of Finance, Feng Chia University, Taichung 40724, Taiwan)

Abstract

The Chinese government has taken many measures to improve the environment, such as directly investing in pollution control infrastructure, but the effectiveness remains to be tested. This paper employs the Toda–Yamamoto test and the Fourier Toda–Yamamoto test to examine the link between environmental governance investment and environmental quality in China from 2003 to 2020. PM2.5, which measures air quality, is used here as an indicator of the environment. The results reveal that environmental governance investment has notably lessened the average concentration of PM2.5 in certain regions, indicating a positive effect on environmental quality, albeit with regional variations. Taking structural breaks into consideration, the relationship between environmental governance investment and environmental amelioration is significant in a smaller number of regions. Additionally, the cross-sectional correlation is further scrutinized to assess the essential robustness of the causality between the two variables. The findings lend support to the aforementioned conclusion. These conclusions provide valuable guidance for China’s policymakers in optimizing environmental governance investments to curb pollution and achieve sustainable development.

Suggested Citation

  • Yiguo Chen & Peng Luo & Tsangyao Chang, 2024. "Testing the Effectiveness of Government Investments in Environmental Governance: Evidence from China," Sustainability, MDPI, vol. 16(14), pages 1-18, July.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:14:p:5828-:d:1431384
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