An empirical evaluation about the effects of environmental expenditures on environmental quality in coordinated market economies.

Acceleration of environmental degradation in recent years highlights the environmental quality as an indication of welfare and increases the number of studies conducted within this framework. Also, economic decision-making units have been doing various spending in order to maintain/increase environmental quality. In this context, the aim of this study is to examine the effect of environmental expenditures made by public sector on ecological deficit as a representative of the environmental quality for 9 coordinated market economies in Europe from 1995 to 2014. According to the findings acquired in the research, a cointegration relationship has been found between variables. It has been detected within the frame of panel ARDL analysis that total public expenditures increase the ecological deficit while environmental expenditures decrease it. In other words, scale effect of public expenditures affects the environmental quality negatively but its composition effect which will take place in favour of environmental expenditures has a positive effect. Thus, instead of the size of public expenditures, focusing on how the content of public expenditures of policy makers is formed in a way highlighting the environmental expenditures can boost welfare over environmental quality.