The role of government intervention in balancing economic growth and environmental sustainability: a global dynamics approach across economies

Francesca Grassetti (), Edgar Sánchez Carrera () and Thomas Seegmuller ()
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Francesca Grassetti: Department of Economics, Society, and Politics, University of Urbino Carlo Bo
Thomas Seegmuller: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper studies the dynamic relationship between economic growth, pollution, and government intervention. To do so, we develop a model that links pollution to the economy's productive capacity, thereby capturing the feedback loops between economic activity, environmental degradation, and fiscal policy intervention. The model incorporates a pollution-sensitive damage function, taxes, and government spending while analyzing economic growth under different levels of government intervention. Therefore, the main paper's contributions reveal that economies can achieve favorable outcomes with low or moderate government intervention, and that our results underscore the vital role of pollution mitigation policy in dynamically balancing economic growth with environmental sustainability.

Keywords: Public Debt; Fiscal Policy; Pollution; Economic Growth (search for similar items in EconPapers)
Date: 2025-09-22
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-05283165v1
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Published in Macroeconomic Dynamics, 2025, 29, pp.e144. ⟨10.1017/S1365100525100503⟩

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Journal Article: The role of government intervention in balancing economic growth and environmental sustainability: a global dynamics approach across economies (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-05283165

DOI: 10.1017/S1365100525100503

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