The Impact of Fiscal Decentralization on Air Pollution in Iran in the Form of Vector Error Correction Model (VECM)

From a financial perspective, decentralization is transfer of resources and doing expenses from the central government to local governments. Many previous empirical studies expresses the correct implementation of fiscal decentralization is an important factor of improve or degradation the environment. Accordingly, the major purpose of this study was to evaluate the impact of fiscal decentralization indicators on air pollution in Iran. This study is paid to study long-term and short-term relationships between air pollution, fiscal decentralization indicators, economic growth, energy consumption and trade volume, by using time series data from 1992-2014. For this purpose is used the Johanson-Juselius co-integration test and Vector Error Correction Model (VECM) method. Also, the statistical analyzes were performed by using the Eviews software. Based on the results of the model estimation by VECM method, fiscal decentralization of revenue, fiscal decentralization of expenditures, fiscal decentralization of autonomy power, economic growth, energy consumption and trade volume increase the Co2 emission in the long-term and short-term. One percent increase in the index of fiscal decentralization indicators, on average, increases Co2 emission by about 0.14 and 0.08 percent in the long-term and short-run, respectively Accordingly, Adopt the suitable policies along the providing the necessary conditions for the expansion of fiscal decentralization, is necessary to control air pollution in the country