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Exploring the effect of economic growth and government expenditure on the environment

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  • Halkos, George
  • Paizanos, Epameinondas

Abstract

This paper examines the effect of economic growth and government spending on the environment using a panel of 71 countries for the time period 1970-2008. In particular, we test the hypothesis of the existence of an inverted U-shaped relationship between economic performance and pollution, as well as the hypothesis of a negative direct relationship between fiscal spending and pollution. To take into account that environmental degradation may respond to changes in income and government spending with a time lag, due to technological and institutional reasons, we apply appropriate dynamic econometric methods. We report the estimates for both the short-run and long-run effects on two different air pollutants, namely SO2 and CO2, distinguishing the results for different levels of economic development. Policy implications range depending on the level of income of the considered countries.

Suggested Citation

  • Halkos, George & Paizanos, Epameinondas, 2014. "Exploring the effect of economic growth and government expenditure on the environment," MPRA Paper 56084, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56084
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    References listed on IDEAS

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    Cited by:

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    2. Zainab Jehan & Faiza Azhar Khan, 2020. "Demographic Changes and Economic Growth in Pakistan: The Role of Capital Stock," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(2), pages 155-178.

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    More about this item

    Keywords

    Government expenditure; economic growth; environment; dynamics.;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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