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Environmental Policy and Economic Growth : Empirical Evidence from Europe

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  • Morley, Bruce
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    Abstract

    The aim of this study is to determine whether environmental policies affect economic growth. Using a standard model of economic growth and a panel of European data, there is evidence that environmental taxes have had a negative effect on economic growth over the last ten years, indicating the ‘double dividend’ does not hold. This effect is particularly evident when other distortionary taxes are included in the model. A second contribution of this study is to incorporate the complimentary measure of renewable energy provision into the model. Again the results indicate a negative relationship between renewable energy and economic growth, offering support for the curse of natural resources.

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    File URL: http://opus.bath.ac.uk/21167/1/1210.pdf
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    Bibliographic Info

    Paper provided by University of Bath, Department of Economics in its series Department of Economics Working Papers with number 21167.

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    Date of creation: Oct 2010
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    Handle: RePEc:eid:wpaper:21167

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    Related research

    Keywords: resources; economic growth; renewable energy; natural; environmental policy;

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    1. Bovenberg, A Lans & Goulder, Lawrence H, 1996. "Optimal Environmental Taxation in the Presence of Other Taxes: General-Equilibrium Analyses," American Economic Review, American Economic Association, vol. 86(4), pages 985-1000, September.
    2. Thorsten Beck & Ross Levine, 2002. "Stock Markets, Banks, and Growth: Panel Evidence," NBER Working Papers 9082, National Bureau of Economic Research, Inc.
    3. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    4. Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
    5. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
    6. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
    7. Paul Ekins & Stefan Speck, 1999. "Competitiveness and Exemptions From Environmental Taxes in Europe," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 13(4), pages 369-396, June.
    8. Bosquet, Benoit, 2000. "Environmental tax reform: does it work? A survey of the empirical evidence," Ecological Economics, Elsevier, vol. 34(1), pages 19-32, July.
    9. Grossman, Gene M & Krueger, Alan B, 1995. "Economic Growth and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 353-77, May.
    10. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    11. Lee, Young & Gordon, Roger H., 2005. "Tax structure and economic growth," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1027-1043, June.
    12. Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
    13. Don Fullerton & Andrew Leicester & Stephen Smith, 2008. "Environmental Taxes," NBER Working Papers 14197, National Bureau of Economic Research, Inc.
    14. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
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