(China School of Economics and Management, University of Fuzhou)
Abstract: This paper, based on the Romer research-development model, examines the effects of environmental taxation policies and government subsidies on high quality economic development. The empirical study is carried out with spatial Dubin model and sub-time empirical, by applying the 1997-2016 panel data from 31 cities in China, and including the element of spatial geography into analysis.
The research reveals that, when the government implements strict environmental taxation policies, enterprises feel obliged to increase their investment in the research and development of clean energy technology. It is also found that the government subsidies to the enterprises in their environmental technology research greatly facilitate and encourage the enterprises in their independent research operations in the area, thus improving energy efficiency, promoting industrial output and effectively combating the ‘three wastes’ problem in industry.
The efficiency in the use of the Model is further enhanced by the inclusion of the element of spatial geography into the empirical analysis, when the said effects are being tested, because, firstly, the spillover effects also exist in environmental pollution, i.e. industrial waste gas and waste water get spread crossborder by means of air and water flow, and secondly, the industrial output values in neighboring areas tend to be similar, indicating similar stages and types of development.
The paper concludes that sustainable economic development can only be achieved by the effective control of environmental pollution and the substantial reduction of the losses in industrial output, which, the paper suggests, can be better attained by executing strict environmental taxation policies and making available sufficient government subsidies concerning environmental protection.
Key Words: Environmental Tax, Government Subsidy, High Quality Economic Development, Spatial Spillover Effect