The Effect of Fiscal Decentralization on Sectoral Green Total Factor Productivity in Pakistan: An Empirical Evidence
Journal Title: Pakistan Journal of Economic Studies - Year 2022, Vol 5, Issue 2
Abstract
The study endeavors to measure sectoral Green Total Factor Productivity (GTFP) and the role of fiscaldecentralization and key environmental regulations in affecting GTFP, for the manufacturing sector ofPakistan over the time period 1975-2019. The growth accounting method is employed to measuresectoral GTFP to examine the sector’s standing in attaining long-run environmental sustainability.Moreover, the role of fiscal decentralization and other lead determinants of GTFP is investigated byemploying the Fully Modified OLS estimation technique. The study provides a highly volatile trend ofsectoral green factor productivity and proved non-linearity in fiscal decentralization and sectoral GTFPrelationship. The role of institutional quality also appears as positively significant for GTFP. Findingssupport a positive relationship between fiscal decentralization and GTFP however the link weakens andturns negative when excessive decentralization is adopted and hence, shows a trajectory of risingsectoral productivity but at decreasing rate with the pace of decentralization. National EnvironmentalProtection Act 1997 and National Conservation Strategy 2005 have appeared significantly and positivelycontributing with an overwhelming effect on green factor productivity for the manufacturing sector anddemands strengthening of environmental policies network along with its rigorous implementation.Moreover, a dedicated though cautious move towards fiscal decentralization is required to achieveenvironmental sustainability in Pakistan.
Authors and Affiliations
Kinza Nadeem, Bushra Yasmin, Iffat Irshad
Keywords
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