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Environmental Taxes and Economic Growth: Evidence from Panel Causality Tests

Author

Listed:
  • Bruce Morley

    (University of Bath)

  • Sabah Abdulla

    (University of Bath)

Abstract

The aim of this study is to determine the causal relationship between environmental taxes and economic growth, using different measures of environmental taxes with GDP as well as adjusted net savings. A panel of European countries and a separate panel of OECD countries are used from 1995 to 2006 and the standard Granger noncausality approach is applied, using panel cointegration and a dynamic panel technique to estimate the error correction models. The results suggest some evidence of long-run causality running from economic growth to increased revenue from the environmental taxes, with also some evidence of short-run causality in the reverse direction. However overall there is little evidence to support the double dividend theory.

Suggested Citation

  • Bruce Morley & Sabah Abdulla, 2010. "Environmental Taxes and Economic Growth: Evidence from Panel Causality Tests," Department of Economics Working Papers 04/10, University of Bath, Department of Economics.
    • Handle: RePEc:eid:wpaper:18528
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    More about this item

    Keywords

    causality; double dividend; environmental taxes; economic growth; granger;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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