Does local government environmental protection expenditure have spatial spillover effects? Evidence from 30 provinces in China

Collaborative environmental management across regions is becoming an increasingly significant development trend. Spatial spillover effects of pollution and competitive interactions of local governments under fiscal decentralisation may result in direct or indirect spatial association of environmental protection expenditure (EPE). To explore the spatial association, this paper examines the spatial spillovers of environmental protection expenditure within neighbouring Chinese provinces from 1998 to 2020. In addition, to take a broader regional perspective, we employ a modified gravity model to construct a spatial association network covering all 30 provinces. The research finds that: (1) There are significant positive spatial spillover effects of EPE. (2) The subregional estimation of SAR models suggests that the spillover effects are still positive in the relative economic backward provinces, whereas the governments in the high-quality economic regions tend to "free-rider". (3) The spatial association of EPE in each province shows a relatively stable network structure pattern. (4) The highquality economic provinces of Shanghai, Jiangsu, Beijing and Zhejiang are at the centre of the network with strong spatial association. Based on the clarification of spillover effects, this paper reveals the roles of provinces in the spatial association network, which can inform governments to develop differentiated environmental policies.