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Abstract: Based on the panel data of 30 provinces in China from 2007 to 2017 and the theory of feasible ability, this paper uses the principal component method to measure the social welfare level at the provincial level in China,  and observes its spatial distribution by Moran index and spatial panel. The paper analyzes the influence of financial decentralization, environmental decentralization, and local environmental protection fiscal expenditure on the social welfare level by using system GMM and differential GMM and through threshold model analysis the threshold effect of decentralization on the social welfare level by threshold model analysis. The results show that: The social welfare level in China presents the characteristics of spatial aggregation, and the imbalance still exists. Fiscal decentralization, environmental fiscal expenditure, and technological innovation have significantly improved the social welfare level, while environmental decentralization weakens the level of social welfare, and there is an inverse curve characteristic between environmental fiscal expenditure and foreign investment projects. Therefore, we need to optimize the structure of fiscal expenditure, improve the performance of fiscal expenditure, and improve the incentive mechanism of environmental fiscal expenditure. According to the concept of green development, the Pareto improvement of economic and non-economic welfare can be realized in different regions.

Keywords: environmental fiscal expenditure; social welfare; decentralization