Examining the asymmetric effects of Pakistan’s fiscal decentralization on economic growth and environmental quality

This study aims to investigate the asymmetric fiscal decentralization effect on economic growth and environmental quality by using Pakistan data from 1984 to 2018. Our findings demonstrate that expenditure decentralization has asymmetric effects on economic growth and CO2 emissions in short- and long-run in Pakistan. Therefore, positive and negative fluctuations in expenditure decentralization affect economic growth and CO2 emissions differently in Pakistan. The results of asymmetric ARDL suggested that negative shock of revenue decentralization is reduced the economic growth and CO2 emissions in the short and long-run, while positive shock of revenue decentralization is reduced the economic growth and CO2 emissions. Our asymmetric results are country-specific and more effective in policy analysis in Pakistan. The outcomes of this study may also help Pakistan’s local governments and the central government in addressing the problem of economic growth and environmental pollution.