The Challenge of Addressing Consumption Pollutants with Fiscal Policy
AbstractWe develop a theoretical model that elucidates the relationship between the quality of governance, composition of government spending and pollution as a by-product of the consumption process. We find that a shift in government spending towards goods that alleviate market failure increases income, which raises consumption pollution, but also increases environmental regulations, which decreases consumption pollution. Conditional on the government adopting a democratic regime, the effect through environmental regulations outweigh the effect through income leading to lower consumption pollution. We estimate an empirical model and find that the results support our theoretical predictions.
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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2014-1.
Length: 42 pages
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Government spending; public goods; consumption based pollution; democracy;
Find related papers by JEL classification:
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
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