Question

How does air pollution increase government expenditure

Answer 1

This paper examines the impact of government spending on the environment using a

panel of 77 countries for the time period 1980%2000. We estimate both the direct

effect of government spending on pollution and the indirect effect which operates

through government spending impact on per capita income and the subsequent effect

of income level on pollution. In order to take into account the dynamic nature of the

relationships examined, appropriate econometric methods are used. For both sulfur

dioxide and carbon dioxide, government spending is estimated to have a negative

direct impact on per capita emissions. The indirect effect on sulfur dioxide is found

to be negative for low levels of income and then becomes positive as income level

increases, while it remains negative for carbon dioxide for the whole income range of

the sample. The resultant total effects follow the patterns of the indirect effects,

which dominate their respective direct ones for each pollutant. Policy implications,

occurring from the paper’s results, range according to the level of income of the

considered countries.