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Environmental expenditure interactions among OECD countries, 1995-2017

Julie Le Gallo () and Youba Ndiaye
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Youba Ndiaye: CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement

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Abstract: How do countries respond to other countries when setting the level of their environmental expenditures? Using data from 1995-2017 on a sample of 28 OECD countries, we examine the nature and extent of strategic interactions in environmental expenditures among OECD countries using a spatial Durbin model including economic and political control variables and both economic and spatial weight matrices reflecting several interaction mechanisms. The results show the existence of significant positive spatial dependence in environmental spending suggesting that OECD countries consider their neighbors' behavior when making policy choices related to environmental expenditures. We also find that the most populous countries or those with high unemployment tend to spend less for environment while countries with a large urban population set higher levels of environmental expenditures. The results are robust to the inclusion of strong cross-sectional dependence under the form of common factors.

Keywords: Environmental expenditure; Strategic interaction; Spatial econometrics; Common factors (search for similar items in EconPapers)
Date: 2021-01
New Economics Papers: this item is included in nep-env and nep-geo
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Published in Economic Modelling, Elsevier, 2021, 94, pp.244-255. ⟨10.1016/j.econmod.2020.10.006⟩

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DOI: 10.1016/j.econmod.2020.10.006

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