Pollution and the State: The Role of the Structure of Government
Ramon Lopez (),
Gregmar Galinato () and
No 48055, 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia from Australian Agricultural and Resource Economics Society
Government spending has significant environmental implications. This paper analyzes the effect of the allocation of government spending between public goods broadly defined and private goods or non-social subsidies on air and water pollution. The theoretical model predicts that a reallocation of expenditures from private subsidies to public goods improves environmental quality by reducing production pollution. We estimate an empirical model that shows that such a reallocation causes a significant reduction in air pollutants namely sulfur dioxide and lead and an improvement in water quality measures including dissolved oxygen and biological oxygen demand.
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