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The channels of the effect of government expenditure on the environment: evidence using dynamic panel data

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  • George E. Halkos
  • Epameinondas A. Paizanos

Abstract

This paper explores the relationship between government spending and environmental quality using panel data for 94 countries for the period 1970–2008. We identify and estimate three distinct channels that comprise the total direct effect of government expenditure on air pollution, namely a marginal effect, an effect conditional on economic growth and an effect conditional on institutional quality. Since adjustment rate of emissions to their equilibrium level is slow due to technological and institutional reasons, we explicitly take into account dynamics by applying appropriate econometric methods. The results demonstrate that there is a significant alleviating direct effect of government expenditure on SO2 and NOx emissions, which increases with the level of economic growth and democracy. However, there is no evidence of a significant effect on pollutants with more global impact on the environment and human health, like N2O and CO2, implying that the adoption of international environmental treaties is required in this case.

Suggested Citation

  • George E. Halkos & Epameinondas A. Paizanos, 2017. "The channels of the effect of government expenditure on the environment: evidence using dynamic panel data," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 60(1), pages 135-157, January.
    • Handle: RePEc:taf:jenpmg:v:60:y:2017:i:1:p:135-157
    DOI: 10.1080/09640568.2016.1145107
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    1. Nerlove, Marc, 1958. "Distributed Lags and Demand Analysis for Agricultural and Other Commodities," Technical Resources 316559, United States Department of Agriculture, Agricultural Marketing Service, Transportation and Marketing Program.
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    Cited by:

    1. Katarzyna Iwińska & Athanasios Kampas & Kerry Longhurst, 2019. "Interactions between Democracy and Environmental Quality: Toward a More Nuanced Understanding," Sustainability, MDPI, vol. 11(6), pages 1-17, March.
    2. Ekonomou, George & Halkos, George, 2024. "Enhancing responsible tourism by establishing ‘smartness’ at destinations," MPRA Paper 121731, University Library of Munich, Germany.
    3. Hayat Khan & Liu Weili & Itbar Khan, 2022. "Environmental innovation, trade openness and quality institutions: an integrated investigation about environmental sustainability," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(3), pages 3832-3862, March.
    4. Mary Donkor & Yusheng Kong & Emmanuel Kwaku Manu & Albert Henry Ntarmah & Florence Appiah-Twum, 2022. "Economic Growth and Environmental Quality: Analysis of Government Expenditure and the Causal Effect," IJERPH, MDPI, vol. 19(17), pages 1-23, August.
    5. Dong-Hyeon Kim & Yi-Chen Wu & Shu-Chin Lin, 2022. "Carbon dioxide emissions, financial development and political institutions," Economic Change and Restructuring, Springer, vol. 55(2), pages 837-874, May.
    6. Van Bon Nguyen, 2024. "Does governance contribute to the public spending - CO2 emissions nexus in developing economies? Policy lessons for sustainable development," Public Sector Economics, Institute of Public Finance, vol. 48(1), pages 79-101.
    7. George, Halkos E. & George, Papageorgiou J. & Emmanuel, Halkos G. & John, Papageorgiou G., 2019. "Environmental regulation and economic cycles," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 172-177.
    8. Muhammad Haroon Shah & Nianyong Wang & Irfan Ullah & Ahsan Akbar & Karamat Khan & Kebba Bah, 2021. "Does environment quality and public spending on environment promote life expectancy in China? Evidence from a nonlinear autoregressive distributed lag approach," International Journal of Health Planning and Management, Wiley Blackwell, vol. 36(2), pages 545-560, March.
    9. Fengqin Qin, 2022. "Fiscal Expenditure Structure, Vertical Fiscal Imbalance and Environmental Pollution," IJERPH, MDPI, vol. 19(13), pages 1-21, July.
    10. Bazyli Czyżewski & Anna Matuszczak & Łukasz Kryszak & Andrzej Czyżewski, 2019. "Efficiency of the EU Environmental Policy in Struggling with Fine Particulate Matter (PM 2.5 ): How Agriculture Makes a Difference?," Sustainability, MDPI, vol. 11(18), pages 1-17, September.
    11. Sheng, Pengfei & Liu, Weiliang, 2024. "Does the government's green commitment matter for energy conservation in China? The role of public spending," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1061-1073.
    12. Halkos, George & Kitsos, Christos, 2024. "Measuring uncertainty, transfer entropy and G-causality In Environmental Economics," MPRA Paper 121764, University Library of Munich, Germany.
    13. Alan Barrell & Pawel Dobrzanski & Sebastian Bobowski & Krzysztof Siuda & Szymon Chmielowiec, 2021. "Efficiency of Environmental Protection Expenditures in EU Countries," Energies, MDPI, vol. 14(24), pages 1-35, December.
    14. Weixiang Zhao & Yankun Xu, 2022. "Public Expenditure and Green Total Factor Productivity: Evidence from Chinese Prefecture-Level Cities," IJERPH, MDPI, vol. 19(9), pages 1-27, May.
    15. José M. Cansino & Rocio Román-Collado & Juan C. Molina, 2019. "Quality of Institutions, Technological Progress, and Pollution Havens in Latin America. An Analysis of the Environmental Kuznets Curve Hypothesis," Sustainability, MDPI, vol. 11(13), pages 1-20, July.

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