Improving people’s livelihood to address climate change: the constraint effects of regional competition and inequality

Achieving the twin goals of carbon peaking and carbon neutrality is a transformative decision made by the Chinese government in response to global climate change. Fiscal policy, as a direct tool for the government to perform its public governance functions, plays a crucial role in promoting carbon emission reduction (CER). Accordingly, this paper theoretically explores how livelihood fiscal expenditure (LFE) affects urban carbon emissions (CE) and proposes research hypotheses. Then, using panel data from 281 cities in China from 2008 to 2020, this study constructs relevant econometric models are constructed for empirical testing. The findings indicate that LFE exerts a significant CER effect. After accounting for endogeneity, policy interventions, and other factors, this result remains robust. Mechanism analysis reveals that the green technology effect of industrial intelligence and the factor spillover effect under market integration are intrinsic drivers of CER. In the heterogeneity analysis, this study divides the sample based on differences in development stage, resource endowment, city size, and mayoral age, yielding several interesting conclusions. Additionally, the results show that regional competition and inequality significantly constrain the CER effect of LFE.