The nexus between government spending, economic growth, and tourism under climate change: testing the CEM model for the USA

Abstract

This study examines the impact of government spending, income, and tourism consumption on CO₂ emissions in the 50 US states through a novel theoretical model derived from the Armey Curve model and the Environmental Kuznets Curve hypothesis. The findings of this research are essential for policymakers to develop effective strategies for mitigating environmental pollution. Utilizing panel cointegration analysis, the study provides valuable insights into whether continued increases in government spending contribute to higher pollution levels. By identifying the threshold point of spending as a percentage of GDP, policymakers can make informed decisions to avoid the trade-off between increased spending and environmental degradation. For instance, the analysis reveals that Hawaii's tipping point is 16.40%. The empirical results underscore the importance of adopting sustainable policies that foster economic growth while minimizing environmental harm. These findings will aid policymakers in formulating targeted and efficient approaches to tackle climate change and promote long-term environmental sustainability in the United States. Moreover, the impact of tourism development on CO₂ emissions varies across states, with some US states experiencing a decrease while others see an increase.

Keywords: Armey curve; Climate change; Environmental Kuznets curve; Government expenditures; Tourism.