Modelling of environmental and economic efficiency: A case of the Ural region

The race for economic growth has its price, and regrettably, leads to negative ecological consequences. A recent economic slowdown in the Ural region also has been accompanied with some serious environmental problems. Against such a background, the paper attempts to identify the growth rates of industrial production that comply with the concept of environmental and economic efficiency. The methodological basis of the research is the new classical economics according to which the economic growth can be described using the production function reflecting the dependence of the output sold on the production factors involved. For the purposes of the research, the author expands the number of variables and supplements labour and capital, the classical independent variables, with industrial output, average per capita income, and expenditures on technological innovations. According to the findings of the correlation analysis, the strongest correlation is between the growth rates of gross regional product and the growth rates of average per capita income and investments into fixed capital. Additionally, the findings reveal a moderate correlation between the growth rates of the emission of pollutants into the atmosphere and the growth rates of industrial production and the growth of the current expenditures on environmental protection. The author constructs four regressions. Two models represent multiple nonlinear regression; another two show pair linear dependence. The first model reflects the dependence of economic growth rates on the factors mentioned above. The second regression, also being a multiple nonlinear one, shows the dependence of growth rates of harmful emissions into the atmosphere on three factors: growth rates of industrial production, current and capital expenditures on environmental protection. In the pair linear regressions, the independent variable is the growth rates of industrial production. The dependent variables are, in the first case, the growth rates of gross regional product, and in the second case, environmental efficiency coefficient. In line with the findings, the optimum growth rate of industrial production, at which the harmful emissions into the atmosphere can decrease by 4 % equals to 0.95.