Wed, 2013-04-17 08:12 | 
This thesis explores the relationship between fiscal policy and environmental quality. Despite the immense importance of government expenditure and government revenues in many economies worldwide, little effort has been so far devoted to the study of the impact of such policies on environmental quality. Therefore, the aim of this study is to provide an analysis of the effect of fiscal policy on several aspects of environmental degradation, by considering four different indicators of air pollution, namely SO2, N2O, CO2 and NOx emissions.
In doing so, it aims to examine dimensions of this relationship that have not been sufficiently considered in previous studies. First, it estimates both the direct and indirect effects and reports the total effect of government expenditure on environmental degradation. In particular, the indirect effect operates through the impact of government spending on income and the subsequent effect of the income level on pollution. Second, it explicitly examines how the direct effect of government expenditure on environmental quality may differ conditional on the level of economic development and the quality of institutions in a country. Third, by analyzing pollutants with different characteristics, such as whether they are production- or consumption-generated and whether they are characterized by local or global externalities, it provides estimates of the effect of fiscal policy between the different indicators of environmental pollution, which can be directly compared. In addition, Vector Autoregression methods, which are solely based on minimal hypotheses about the signs of the impacts of macroeconomic shocks are used and offer insights concerning the short-term interrelationships between government expenditure and government revenues with air pollution. Finally, the importance of employing appropriate dynamic econometric techniques in this framework is emphasized throughout the empirical analysis and the dynamic nature of the examined relationships is explicitly taken into consideration.
The study provides evidence that government expenditure has a negative or non-positive direct effect on the different indicators of environmental degradation, while this alleviating direct effect is significantly reinforced in developed countries and democratic jurisdictions. In addition, the estimated direct effect is greater in significance and in magnitude for pollutants that are characterized by shorter atmospheric life time, local geographical range and therefore more immediate impact on human health, compared to pollutants with externalities that are more global and their impact occurs mostly in the future. Moreover, the analysis shows that the estimated direct effect is greater in significance and magnitude on production-generated pollution, compared to consumption-related pollution. The estimated total effect of government expenditure on environmental degradation is negative for low levels of income, though decreasing in absolute value, and becomes positive in more developed countries. Regarding the composition of government expenditure, the results confirm the hypothesis that the alleviating direct effect of government spending on environmental degradation can be considerably enhanced by spending targeted on specific functional categories, such as spending on public goods and on environmental protection. Finally, an attempt to stimulate the economy through tax-cuts is associated with an increase in consumption-related CO2 emissions in the short-run, while there is little evidence of an effect on production-generated CO2 emissions.
The final chapter of this thesis summarizes the research findings, as well as the conclusions and policy implications drawn from these findings.
Ph.D Candidate:
Epameinondas Paizanos
Department:
Department of Economics
School:
Department of Economics
Supervisor:
Professor George Em. Halkos (halkos@uth.gr)
Supervising Committee:
(1) Prof. George Em. Halkos (2) Prof. Konstantinos P. Bithas (3) Prof. Euthymios G. Tsionas Παραδοτέα έργου δημοσίως προσβάσιμα:
