Public and private spending for environmental protection: a cross-country policy analysis

Abstract

OECD data are used to investigate public and private environmental expenditures and, although they are more complete and consistent than other datasets, they are still poor. This is important in the context of measuring the benefits of environmental protection, when little is really known about its actual costs. Despite these limitations, this study demonstrates that there has been no shift towards an increasing private sector burden relative to the public sector over time. The paper also finds little evidence to show that environmental expenditures negatively impact on economic growth, although there is inconsistency between the "no effects" finding of the competitiveness literature and the "negative effects" finding of most of the productivity literature. Finally, the elasticity of expenditure with respect to income is found to be 1.2, lower than would be expected if the "environmental demand effect" is significant in explaining the downward slope of the environmental Kuznets curve.