Government Spending and Air Pollution in the US

Abstract

This study examines the effect of the composition of federal and state government spending on various important air pollutants in the United States using a newly assembled data set of government expenditures. The results indicate that a reallocation of spending from private goods to social and public goods by state and local governments reduces air pollution concentrations while changes in the composition of federal spending have no effect. An increase in the share of social and public goods spending by state and local governments by 1 standard deviation reduces sulfur dioxide concentrations by 2–3%, particular matter 2.5 concentrations by 3–5%, and ozone concentrations by 2–6% of their respective standard deviations. The results are robust to various sensitivity checks.