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Environmental expenditure, policy stringency and green economic growth: evidence from OECD countries

Author

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  • Amir Arjomandi
  • Hassan F. Gholipour
  • Reza Tajaddini
  • Charles Harvie

Abstract

This study explores the link between environmental policy stringency and spending and the growth of environmental GDP and productivity. Using the Pooled Mean Group Autoregressive Distributed Lag model, we examine the short- and long-term effectiveness of environmental policy stringency and environmental spending on pollution-adjusted GDP and productivity growth for a sample of OECD nations. Although these policies and their outcomes differ considerably from country to country, our findings reveal that governments’ expenditure on environmental protection emerges as a significantly stimulatory factor of national output in the short-term. Our long-run results show that both tighter environmental policies and environmental expenditure can slow down ‘green’ GDP and productivity growth over time with policy stringencies having a weaker impact. Overall, our findings do not support the Porter Hypothesis, but rather confirm the widely held view that these policies may hinder economic activity and growth.

Suggested Citation

  • Amir Arjomandi & Hassan F. Gholipour & Reza Tajaddini & Charles Harvie, 2023. "Environmental expenditure, policy stringency and green economic growth: evidence from OECD countries," Applied Economics, Taylor & Francis Journals, vol. 55(8), pages 869-884, February.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:8:p:869-884
    DOI: 10.1080/00036846.2022.2094883
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    Cited by:

    1. Salim Bagadeem & Ayesha Siddiqui & Sapna Arora Narula & Najib H. S. Farhan & Muneer Ahmad Magry, 2024. "Impact of Firm-Specific and Macroeconomic Determinants on Environmental Expenditures: Empirical Evidence from Manufacturing Firms," Economies, MDPI, vol. 12(7), pages 1-25, June.
    2. Lee, Chien-Chiang & Wang, Chih-Wei & Hong, Pei-Hsuan & Lin, Weizheng, 2024. "Environmental policy stringency and bank risks: Does green economy matter?," International Review of Financial Analysis, Elsevier, vol. 91(C).

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