Can Government Budget Management Reconcile Environmental Governance with Sustainable Economic Development?

Government budget management serves as a critical enabler for the development of a green economy and represents an essential pathway to promote sustainable urban development. The government budget delineates the scope and direction of governmental activities, while the advancement of a green economy heavily relies on the support of budgetary funds. Adopting the perspective of government budget management capabilities, this study examines the budget deviations across 288 prefecture-level cities in China from 2007 to 2021. By constructing a double fixed-effects model, we assess whether government budget management can effectively balance environmental governance with sustainable economic development, thereby fostering green economic growth. The findings indicate that government budget management indeed achieves this balance, with revenue management playing a more significant role compared to expenditure management. Mechanism analyses reveal that at the revenue level, government budget management regulates local economic behavior through tax constraints, while at the expenditure level, it drives green economic development by promoting technological innovation. Heterogeneity analysis further demonstrates that geographical differences, humanistic environment factors, and the degree of marketization significantly influence the development of the green economy. Based on these insights, this paper proposes targeted policy recommendations aimed at mitigating the tension between environmental governance and sustainable economic development and facilitating the attainment of green economic objectives ultimately.