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Environmental expenditure spillovers: Evidence from an estimated multi-area DSGE model

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  • Pan, Xiongfeng
  • Xu, Haitao
  • Li, Mengna
  • Zong, Tianjiao
  • Lee, Chew Tin
  • Lu, Yuduo

Abstract

This article constructs and estimates a multi-area dynamic stochastic general equilibrium model with a spatial simultaneous equation. Taking Beijing-Tianjin-Hebei region in China as an example, we explain the dynamic effect of environmental expenditure shock and its spillover effects. Environmental expenditure has an obvious crowding-out effect on consumption and investment in local area, but has some positive influences on the economy of external regions. Over the business cycle, environmental expenditure shock in local area can well explain the volatility of real output and social investment in the last 52 quarters. However, environmental expenditure shocks in external regions have little contribution to the volatility of output and investment in local area. One interesting result is that the contribution of environmental expenditure shocks in external regions to the trend of pollution fluctuation is greater than that in local area.

Suggested Citation

  • Pan, Xiongfeng & Xu, Haitao & Li, Mengna & Zong, Tianjiao & Lee, Chew Tin & Lu, Yuduo, 2020. "Environmental expenditure spillovers: Evidence from an estimated multi-area DSGE model," Energy Economics, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:eneeco:v:86:y:2020:i:c:s0140988319304426
    DOI: 10.1016/j.eneco.2019.104645
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    More about this item

    Keywords

    Environmental expenditure; Spillover effects; Multi-area DSGE model; Pollutant emissions; Economic fluctuation;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H59 - Public Economics - - National Government Expenditures and Related Policies - - - Other
    • O13 - Economic Development, Innovation, 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
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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