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The Role of Government Spending on Deforestation and Carbon Dioxide Emissions from Land Use Change

Gregmar Galinato () and Suzette Galinato

No 2013-14, Working Papers from School of Economic Sciences, Washington State University

Abstract: There has been a shift in fiscal policies in developing countries with good quality institutions. Government spending is less likely to be procyclical and instead countercyclical where spending rises during times of recession and falls during times of expansion to reduce the effects of the business cycle. We show using a theoretical model that moving towards a countercyclical spending pattern yields an unintended consequence: during times of recession there is an increase in deforestation and carbon dioxide emissions from land use change. We empirically test the results from our theoretical model and find that an increase in total government spending significantly increases forest land clearing for agricultural production in the short run leading to more carbon dioxide emissions. In the long run, there is a lower steady-state forest biomass and carbon dioxide emissions are significantly higher than in the short run.

Keywords: Carbon dioxide emission; deforestation; government spending; public goods expenditure (search for similar items in EconPapers)
JEL-codes: H11 H20 O13 Q23 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013
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