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Fiscal Spending and the Environment: Theory and Empirics

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Author Info

  • Ramon Lopez
  • Gregmar Galinato
  • Asif Islam

    ()
    (School of Economic Sciences, Washington State University)

Abstract

During economic crises, governments often increase fiscal spending to stimulate the economy. While the fiscal spending surge is sometimes temporary, recessions are opportunities to revise the spending composition often in favor of expenditures in social programs and other public goods which tend to persist over time. We model and measure the impact of fiscal spending patterns on the environment. The model predicts that a reallocation of government spending composition towards public goods reduces pollution while increasing total government spending has an ambiguous effect on pollution. We find consistent empirical results for various air and water pollutants. Increased environmental sustainability may be an important silver lining of economic crises.

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File URL: http://faculty.ses.wsu.edu/WorkingPapers/Galinato/WP2009-22.pdf
File Function: First version, 2009
Download Restriction: no

Bibliographic Info

Paper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-22.

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Length: 53 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:wsu:wpaper:galinato-4

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Web page: http://faculty.ses.wsu.edu/
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Keywords: Government Spending; Public Goods; Pollution;

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Cited by:
  1. Kyriaki Remoundou & Fikret Adaman & Phoebe Koundouri & Paulo Nunes, . "Is the Value of Environmental Goods Sensitive to the Source of Public Funding? Evidence from a Marine Restoration Programme in the Black Sea," DEOS Working Papers 1321, Athens University of Economics and Business.
  2. Halkos, George & Paizanos, Epameinondas, 2014. "Exploring the effect of economic growth and government expenditure on the environment," MPRA Paper 56084, University Library of Munich, Germany.
  3. Gregmar Galinato, . "The Challenge of Addressing Consumption Pollutants with Fiscal Policy," Working Papers 2014-1, School of Economic Sciences, Washington State University.
  4. Halkos, George E. & Paizanos, Epameinondas Α., 2013. "The effect of government expenditure on the environment:An empirical investigation," Ecological Economics, Elsevier, vol. 91(C), pages 48-56.
  5. Gregmar Galinato & Suzette Galinato, 2013. "The Role of Government Spending on Deforestation and Carbon Dioxide Emissions from Land Use Change," Working Papers 2013-14, School of Economic Sciences, Washington State University.
  6. Lopez, Ramon E. & Palacios, Amparo, 2010. "Have Government Spending and Energy Tax Policies Contributed to make Europe Environmentally Cleaner?," Working Papers 94795, University of Maryland, Department of Agricultural and Resource Economics.
  7. Islam, Asif M. & López, Ramón E., 2013. "Government Spending and Air Pollution in the US," Working Papers 144406, University of Maryland, Department of Agricultural and Resource Economics.
  8. Halkos, George, 2012. "The impact of government expenditure on the environment: An empirical investigation," MPRA Paper 39957, University Library of Munich, Germany.
  9. López, Ramón & Palacios, Amparo, 2011. "Why Europe has become environmentally cleaner: Decomposing the roles of fiscal, trade and environmental policies," CEPR Discussion Papers 8551, C.E.P.R. Discussion Papers.

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