Determinants of the expenditure side of environmental federalism – panel data research on countries in Europe

Abstract

The purpose of the article is to examine the influence of financial, socio-economic, and environmental degradation factors on the expenditure scope of environmental federalism. The panel data models were estimated based on 26 European countries for the period between 2007 and 2020. The research hypothesis of the article posits that the sound fiscal position of the local government and the financial sustainability stemming from it deepens the expenditure side of environmental federalism, especially when considering the population and its structure, the size of the economy, population, and the pollution generated by it. The article reveals that local government avoidance of both deficits and excessive indebtedness ends up promoting a higher scope of expenditure side of environmental federalism. In addition, in European countries, the significance of expenditures on environmental protection visible in local budgets is increased for smaller economies that are less environmentally degraded.