Fiscal Spending and the Environment: Theory and Empirics
AbstractDuring 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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Bibliographic InfoPaper provided by School of Economic Sciences, Washington State University in its series Working Papers with number 2009-22.
Length: 53 pages
Date of creation: Aug 2009
Date of revision:
Government Spending; Public Goods; Pollution;
Other versions of this item:
- López, Ramón & Galinato, Gregmar I. & Islam, Asif, 2011. "Fiscal spending and the environment: Theory and empirics," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 180-198, September.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-ENV-2010-01-16 (Environmental Economics)
- NEP-PBE-2010-01-16 (Public Economics)
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- Gregmar Galinato, . "The Challenge of Addressing Consumption Pollutants with Fiscal Policy," Working Papers 2014-1, School of Economic Sciences, Washington State University.
- Halkos, George, 2012. "The impact of government expenditure on the environment: An empirical investigation," MPRA Paper 39957, University Library of Munich, Germany.
- 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.
- 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.
- 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.
- 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.
- 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.
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