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The role of government intervention in balancing economic growth and environmental sustainability: a global dynamics approach across economies

Author

Listed:
  • Francesca Grassetti

    (Department of Economics, Society, and Politics, University of Urbino Carlo Bo)

  • Edgar J Sanchez Carrera

    (Department of Economics and Management (DISEI), University of Florence)

  • Thomas Seegmuller

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper studies the dynamic relationship between economic growth, pollution, and government intervention. To do so, we develop a model that links pollution to the economy's productive capacity, thereby capturing the feedback loops between economic activity, environmental degradation, and fiscal policy intervention. The model incorporates a pollution-sensitive damage function, taxes, and government spending while analyzing economic growth under different levels of government intervention. Therefore, the main paper's contributions reveal that economies can achieve favorable outcomes with low or moderate government intervention, and that our results underscore the vital role of pollution mitigation policy in dynamically balancing economic growth with environmental sustainability.

Suggested Citation

  • Francesca Grassetti & Edgar J Sanchez Carrera & Thomas Seegmuller, 2025. "The role of government intervention in balancing economic growth and environmental sustainability: a global dynamics approach across economies," Post-Print halshs-05283165, HAL.
    • Handle: RePEc:hal:journl:halshs-05283165
    DOI: 10.1017/S1365100525100503
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-05283165v1
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