The Effect of Government Expenditures on Air Quality by Functional Classification: A Panel Data Analysis for EU Countries

The aim of this study is to investigate the effect of government expenditures on air pollution. We have studied the effect of government expenditures on air pollution within the framework of functional classifications of governmental expenditure, for 30 countries (27 EU countries and the United Kingdom, Norway and Switzerland) over the period 1995-2017. The analysis results indicate that per capita total public expenditure has a significantly negative impact on CO2 emissions. With regard to functional classification of government expenditures, the results show that the expenditures for economic services, education expenditures and social protection expenditures reduce air pollution and increase environmental quality. On the other hand, health expenditures, environmental protection expenditures and general service expenditures have no significant effect on air pollution.