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Does Fiscal Policy influence per capita CO2 emission? A cross country empirical analysis
  • Sacchidananda Mukherjee
  • Debashis Chakraborty
Countries disburse subsidies with various motivations, e.g. to promote industrial development, facilitate innovation, support national champions, ensure redistribution. The devolution of subsidies may however also encourage economic activities leading to climate change related concerns, reflected through higher greenhouse gases (GHGs) emissions, if economic activities are conducted beyond sustainable point. Through a cross-country empirical analysis involving 131 countries over 1990-2010, the present analysis observes that higher proportional devolution of budgetary subsidies lead to higher CO2 emissions. The countries with higher CO2 emissions are also characterized by higher per capita GDP, greater share of manufacturing sector in their GDP and higher level of urbanization. The results further demonstrate that structure of economy is a crucial determinant for per capita CO2 emission, as countries having higher share in agriculture and services in GDP are characterized by lower per capita CO2 emission. In addition, the empirical findings underline the importance of the type of government subsidy devolution on CO2 emissions. It is also observed that countries having high tax-GDP ratio are marked by lower per capita CO2 emission, implying government budgetary subsidy is detrimental for environment whereas tax is conducive for sustainability. The analysis concludes by noting the importance of limiting provision of subsidies both in developed and developing countries.
  • Government Budgetary Subsidy,
  • Tax-GDP ratio,
  • Per Capita CO2 Emission,
  • Government Policy,
  • Environmental Kuznets Curve,
  • Panel Data Analysis
Publication Date
January, 2015
Green Growth Knowledge Platform (GGKP) Third Annual Conference Fiscal Policies and the Green Economy Transition: Generating Knowledge – Creating Impact 29-30 January, 2015 Ca’ Foscari University of Venice, Venice, Italy
Citation Information
Sacchidananda Mukherjee and Debashis Chakraborty. "Does Fiscal Policy influence per capita CO2 emission? A cross country empirical analysis" (2015)
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