The impact of fiscal decentralization, green innovation, and geopolitical risks on sustainable development
Date Published:
25/07/2025
Online Published:
25/07/2025
Section:
Finance, Banking, Accounting, and Auditing
Main Article Content
Abstract
This study employs Bayesian regression to examine the impact of fiscal decentralization, green innovation, and geopolitical risks on sustainable development across 19 developed and 12 emerging economies over the period 2010–2022. The empirical results indicate that fiscal decentralization hinders sustainable development in emerging economies but promotes it in developed countries. Conversely, geopolitical risks act as a driver of sustainable development in emerging markets, while it negatively affects sustainable development in developed economies. Notably, green innovation consistently contributes to the enhancement of sustainable development across all countries examined. Based on these findings, the study proposes several policy implications tailored to the development context of each group of countries.
Keywords
Bayesian regression; Fiscal decentralization; Green innovation; Geopolitical risks; Sustainable development
Article Details
Field of Economic (JEL Codes)
C33 - Panel Data Models • Spatio-temporal Models - Multiple or Simultaneous Equation Models • Multiple Variables, E60 - General - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook, Q01 - Sustainable Development - General
References
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Chang, K., Liu, L., Luo, D., & Xing, K. (2023). The impact of green technology innovation on carbon dioxide emissions: The role of local environmental regulations. Journal of Environmental Management, 340, 117990. https://doi.org/10.1016/j.jenvman.2023.117990
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Cheng, Y., Awan, U., Ahmad, S., & Tan, Z. (2021). How do technological innovation and fiscal decentralization affect the environment? A story of the fourth industrial revolution and sustainable growth. Technological Forecasting and Social Change, 162, 120398. https://doi.org/10.1016/j.techfore.2020.120398
Chien, F. (2023). The impact of green investment, eco-innovation, and financial inclusion on sustainable development: evidence from China. Engineering Economics, 34(1), 17-31. https://doi.org/10.5755/j01.ee.34.1.32159
Chien, F., Paramaiah, C., Pham, H. C., Phan, T. T. H., & Ngo, T. Q. (2023). The impact of eco-innovation, trade openness, financial development, green energy and government governance on sustainable development in ASEAN countries. Renewable Energy, 211, 259-268. https://doi.org/10.1016/j.renene.2023.04.109
Davey, K. (2003). Fiscal decentralization in eastern Europe: Stages of reform. The Kosovo decentralization briefing book, 41.
Díaz-García, C., González-Moreno, Á., & Sáez-Martínez, F. J. (2015). Eco-innovation: insights from a literature review. Innovation, 17(1), 6-23. https://doi.org/10.1080/14479338.2015.1011060
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
Dinh, L. Q., Oanh, T. T. K., & Ha, N. T. H. (2024). Financial stability and sustainable development: Perspectives from fiscal and monetary policy. International Journal of Finance & Economics, 1–18. https://doi.org/10.1002/ijfe.2981
Downs, A. (1957). An economic theory of democracy. Harper and Row, 28.
Du, K., & Li, J. (2019). Towards a green world: How do green technology innovations affect total-factor carbon productivity. Energy Policy, 131, 240-250. https://doi.org/10.1016/j.enpol.2019.04.033
Du, K., Li, P., & Yan, Z. (2019). Do green technology innovations contribute to carbon dioxide emission reduction? Empirical evidence from patent data. Technological Forecasting and Social Change, 146, 297-303. https://doi.org/10.1016/j.techfore.2019.06.010
Fang, S., & Fang, W. (2023). How fiscal decentralization and trade diversification influence sustainable development: Moderating role of resources dependency. Resources Policy, 84, 103750. https://doi.org/10.1016/j.resourpol.2023.103750
Farooq, F., Tanveer, A., & Faheem, M. (2023). Analyzing the impact of geopolitical risk, and renewable energy towards sustainable development in China. iRASD Journal of Economics, 5(2), 422-440. https://doi.org/10.52131/joe.2023.0502.0137
Feng, Y., Sabir, S. A., Quddus, A., Wang, J., & Abbas, S. (2024). Do the grey clouds of geopolitical risk and political globalization exacerbate environmental degradation? Evidence from resource-rich countries. Resources Policy, 89, 104533. https://doi.org/10.1016/j.resourpol.2023.104533
Flegal, J. M., Haran, M., & Jones, G. L. (2008). Markov chain Monte Carlo: Can we trust the third significant figure?. Statistical Science, 250-260. https://www.jstor.org/stable/27645897
Fredriksson, P. G., & Millimet, D. L. (2002). Strategic interaction and the determination of environmental policy across US states. Journal of urban economics, 51(1), 101-122. https://doi.org/10.1006/juec.2001.2239
Grossman, G. M., Krueger, A. B. (1991). Environmental Impacts of a North American Free Trade Agreement. (NBER workingpaper, No. w3914).
Ha, L. T. (2023). An investigation of the nexus between green innovation and environmental sustainability in Vietnam: new evidence from the wavelet analysis. Environmental Science and Pollution Research, 1-15. https://doi.org/10.1007/s11356-023-31398-4
Hoang, D. P., Chu, L. K., To, T. T., & Pham, N. X. (2024). Exploring the nexus between fiscal decentralization and ecological sustainability: a fresh perspective from the moderating role of geopolitical risk and updated international evidence. Environmental Science and Pollution Research, 1-27. https://doi.org/10.1007/s11356-024-31989-9
Hui, J., & Martinez-Vazquez, J. (2021). Sustainable development and the optimal level of fiscal expenditure decentralization.
Husnain, M. I. U., Syed, Q. R., Bashir, A., & Khan, M. A. (2022). Do geopolitical risk and energy consumption contribute to environmental degradation? Evidence from E7 countries. Environmental Science and Pollution Research, 29(27), 41640-41652. https://doi.org/10.1007/s11356-021-17606-z
Ji, X., Umar, M., Ali, S., Ali, W., Tang, K., & Khan, Z. (2021). Does fiscal decentralization and eco‐innovation promote sustainable environment? A case study of selected fiscally decentralized countries. Sustainable Development, 29(1), 79-88. https://doi.org/10.1002/sd.2132
Jin, H., & Jakovljevic, M. (2023). Fiscal decentralization and the human development index: a cross-border empirical study. Sustainability, 15(11), 8784. https://doi.org/10.3390/su15118784
Marx, K., & Engels, F. (2019). The communist manifesto. In Ideals and ideologies (pp. 243-255). Routledge.
Khan, Z., Ali, S., Dong, K., & Li, R. Y. M. (2021). How does fiscal decentralization affect CO2 emissions? The roles of institutions and human capital. Energy Economics, 94, 105060. https://doi.org/10.1016/j.eneco.2020.105060
Konisky, D. M. (2007). Regulatory competition and environmental enforcement: Is there a race to the bottom?. American Journal of Political Science, 51(4), 853-872. https://doi.org/10.1111/j.1540-5907.2007.00285.x
Koseoglu, A., Yucel, A. G., & Ulucak, R. (2022). Green innovation and ecological footprint relationship for sustainable development: Evidence from top 20 green innovator countries. Sustainable development, 30(5), 976-988. https://doi.org/10.1002/sd.2294
Kuai, P., Yang, S., Tao, A., & Khan, Z. D. (2019). Environmental effects of Chinese-style fiscal decentralization and the sustainability implications. Journal of Cleaner Production, 239, 118089. https://doi.org/10.1016/j.jclepro.2019.118089
Li, J., & Xu, Y. (2023). Does fiscal decentralization support green economy development? Evidence from China. Environmental Science and Pollution Research, 30(14), 41460-41472. https://doi.org/10.1007/s11356-023-25240-0
Lingyan, M., Zhao, Z., Malik, H. A., Razzaq, A., An, H., & Hassan, M. (2022). Asymmetric impact of fiscal decentralization and environmental innovation on carbon emissions: Evidence from highly decentralized countries. Energy & Environment, 33(4), 752-782. https://doi.org/10.1177/0958305X211018453
Martínez-Vázquez, J., Lago-Peñas, S., & Sacchi, A. (2017). The impact of fiscal decentralization: A survey. Journal of Economic Surveys, 31(4), 1095-1129. https://doi.org/10.1111/joes.12182
Millimet, D. L. (2003). Assessing the empirical impact of environmental federalism. Journal of Regional Science, 43(4), 711-733. https://doi.org/10.1111/j.0022-4146.2003.00317.x
Minh Phuong, N. T., Xuan Huong, N. T., Van Song, N., Huyen, V. N., Hai Yen, N. T., Giap, T. C., ... & Van Huong, N. (2023). The role of eco-innovation, eco-investing, and green bonds in achieving sustainable economic development: evidence from Vietnam. Economic research-Ekonomska istraživanja, 36(2). https://doi.org/10.1080/1331677X.2023.2169839
Nawaz, M. Z., Guo, J., Nawaz, S., & Hussain, S. (2023). Sustainable development goals perspective: nexus between Christians’ religious tourism, geopolitical risk, and CO2 pollution in Italy. Environmental Science and Pollution Research, 30(22), 62341-62354. https://doi.org/10.1007/s11356-023-26463-x
Nguyen, D. T., Le, T. H., Do, D. D., & Nguyen, H. N. (2023). Does geopolitical risk hinder sustainable development goals? Evidence from a panel analysis. Journal of Environmental Management, 347, 119204. https://doi.org/10.1016/j.jenvman.2023.119204
Oanh, T. T. K. (2024). Sustainable development: Driving force from the relationship between finance inclusion, green finance and green growth. Sustainable Development, 32(3), 2811-2829. https://doi.org/10.1002/sd.2808
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How to Cite
Nguyen , T. H. H., Tran , T. K. O., & Le , H. S. (2025). The impact of fiscal decentralization, green innovation, and geopolitical risks on sustainable development. Journal of Finance - Marketing Research, 3(2), 15-32. https://doi.org/10.52932/jfmr.v3i2e.843