The role of capital and labour in shaping the environmental effects of fiscal stimulus

Krajewski, Piotr; Mackiewicz, Michał

doi:10.1016/j.jclepro.2019.01.190

Cited by 20 publications

(8 citation statements)

References 73 publications

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“…In addition to Economides and Xepapadeas [20], Dissou and Karnizova [21] extend the models of Heutel [11] and Fischer and Springborn [13] by distinguishing between energy and nonenergy sectors on the supply side. Similar to Fischer and Springborn [13], they find that the volatility of macroeconomic variables is dampened even if the emission cap is only imposed in the energy sector (Due to space constraint, all studies that utilitize E-DSGE models are not reviewed here; other important studies include Zhang [22], Krajewski and Mackiewicz [23][24][25]. In addition, it is worth noting that E-DSGE model have been applied to the field of energy economics; notable examples include but are not limited to Balke and Brown [26], Aminu [27] and Mȃnescu and Nuño [28].…”

Section: E-dsge Modelsmentioning

confidence: 89%

“…The mechanism of the environmental tax rate in mitigating air pollutant emission is through raising the firms' cost of environmental tax payment per unit of emission and thus forcing the firms to exert more effort on abatement. However, according to (23), firms in city a would face a higher marginal cost of production under a higher environmental tax rate, and as a result, they tend to reduce their scale of production and hire less labor. Hence, on the one hand, a higher tax rate could mitigate air pollution and increase labor supply by encouraging households in both cities to work in city a, while also, on the other hand, reducing labor demand.…”

Section: Environmental Taxationmentioning

confidence: 99%

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Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

Chan

2019

Sustainability

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Recent research has started to apply environmental dynamic stochastic general equilibrium (E-DSGE) models for climate policy analysis. However, all of the studies assume a closed economy setting, where there is no interaction of the economy with an outside economy; this paper fills the gap by constructing a two-city E-DSGE model that features labor migration. With the model, we solve for the optimal environmental tax rate determined by a Ramsey social planner, who maximizes household utility and takes into account the policy’s impact on labor migration. We find the following. (i) The optimal environmental tax rate should be more volatile and procyclical than the rates predicted in the aforementioned literature. (ii) In the closed economy setting, a higher environmental tax rate would always dampen production, while in our setting, it could stimulate output through deterring labor outflow and attracting labor inflow. (iii) We complement the existing literature by emphasizing that the optimal environmental tax rate in a city should respond not only to the shocks that occur internally, but also to those that occur in the opponent city. In particular, we find that it is optimal to reduce the environmental tax rate if a positive total factor productivity (TFP) shock occurs in the neighbor city.

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Section: E-dsge Modelsmentioning

confidence: 89%

Section: Environmental Taxationmentioning

confidence: 99%

Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

Chan

2019

Sustainability

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“…It is believed that a labor-intensive production mode may lead to a lower environmental burden than a capital-intensive production mode. Research suggests that capital-saving technological progress has promoted the development of labor-intensive industries, reduced the proportion of capital-intensive industries, and promoted the reduction of smog [13,24,25].…”

Section: Literature Reviewmentioning

confidence: 99%

“…Additionally, there are also researchers who classify technological progress and point out that the environmental effects of different types of technological progress are different, such as capital-intensive technology and labor-intensive technology, or production technology progress and energy-saving technology progress. However, in the long run, technological progress plays an important role in environmental governance [13,25,54].…”

Section: Literature Reviewmentioning

confidence: 99%

The Change of Sources of Growth and Sustainable Development in China: Based on the Extended EKC Explanation

Wen

Dai

2021

Sustainability

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This paper extends the “sources of growth” explanation for the Environmental Kuznets Curve (EKC) proposed by Copeland and Taylor in a concise theoretical framework, that is, when the sources of growth are transformed from physical capital and labor to human capital and knowledge, the environmental pollution could at first rise and then fall with a sustainable growth in per capita income. Using the provincial panel data from 1995 to 2017 in the mainland of China, an empirical analysis is carried out by the System Generalized Method of Moment (sys-GMM). The results show that: first, the EKC hypothesis exists in China. The inflection point for SO2 emissions has been passed in all of the provincial regions, and for CO2 and comprehensive environmental pollution losses have not been passed in some regions, but the inflection point from the national average level in China has been passed; second, the main production factors of the traditional economy, physical capital and labor, are positively correlated with environmental pollution, while human capital and green technological progress, the main production factors of the knowledge economy, are negatively related to environmental pollution; third, human capital and green technological progress have become important factors to promote economic growth, and human capital, in particular, has become the primary factor, which indicates that China is in the process of transforming traditional economy into a knowledge economy. The stage of China’s economic development and the trend of environmental pollution is consistent with the extended “sources of growth” explanation for the EKC, which proved the theoretical hypothesis. This has an important practical significance for China’s current economic reform and important theoretical value for the economic transformation and sustainable development of developing countries. The paper finally puts forward corresponding policy recommendations.

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“…23 To achieve energy-related CO 2 mitigation, the government can undertake a number of measures: it can promote the production of low-carbon products; 24 industries; 25 increase government budgets on health, social security, and education; regulate population density to improve the accumulation of human capital; and guide low-carbon practices in the daily life of households. 26 Some empirical studies have evaluated the impacts of fiscal expenditure on CO 2 emissions in China; however, analyses have produced contradictory results 14 (see Supporting Information (SI) for a review). More recently, increasing attention has been given to one possible factor, that is, for countries such as China with a multilevel government, the effect of fiscal expenditure is constrained by the apportioning of expenditure responsibilities between the central and local governments.…”

Section: Introductionmentioning

confidence: 99%

Potential Role of Fiscal Decentralization on Interprovincial Differences in CO₂ Emissions in China

Cheng

Fan

Meng

et al. 2020

Environ. Sci. Technol.

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Spatial differences in CO2 emissions must be taken into account in CO2 mitigation. In this work, a spatial within–between logarithmic mean Divisia index decomposition model was developed by using cluster analysis to evaluate the potential role of fiscal decentralization in driving interprovincial differences in CO2 emissions in China. The results revealed that the direct impact of fiscal decentralization emerged as a major emission driver after 2009. The differences of provincial CO2 emissions from the national average can be mainly attributed to emission differences between the distinct provincial clusters. The direct and indirect impacts of fiscal decentralization contributed to the shaping of differences in CO2 emission between provinces and their provincial cluster average, and between provincial cluster average and the national average. Reducing the differences in CO2 emission between distinct provincial clusters should be considered a breakthrough for the Chinese government. The provinces with CO2 emissions below the national average and above the average emissions of its provincial cluster still have the potential for further mitigation. Optimizing the expenditure authority of the central and provincial governments and improving the energy efficiency of the provincial fiscal expenditure are the two effective ways to further promote CO2 mitigation.

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The role of capital and labour in shaping the environmental effects of fiscal stimulus

Cited by 20 publications

References 73 publications

Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

The Change of Sources of Growth and Sustainable Development in China: Based on the Extended EKC Explanation

Potential Role of Fiscal Decentralization on Interprovincial Differences in CO₂ Emissions in China

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The role of capital and labour in shaping the environmental effects of fiscal stimulus

Cited by 20 publications

References 73 publications

Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

Optimal Environmental Tax Rate in an Open Economy with Labor Migration—An E-DSGE Model Approach

The Change of Sources of Growth and Sustainable Development in China: Based on the Extended EKC Explanation

Potential Role of Fiscal Decentralization on Interprovincial Differences in CO2 Emissions in China

Contact Info

Product

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Potential Role of Fiscal Decentralization on Interprovincial Differences in CO₂ Emissions in China