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The role of government intervention in balancing economic growth and environmental sustainability: a global dynamics approach across economies

Published online by Cambridge University Press:  22 September 2025

Francesca Grassetti Open the ORCID record for Francesca Grassetti [Opens in a new window] ,
Edgar J. Sanchez Carrera Open the ORCID record for Edgar J. Sanchez Carrera [Opens in a new window]  and
Thomas Seegmuller
Francesca Grassetti*
Affiliation:
Department of Economics, Society, and Politics, University of Urbino Carlo Bo, Urbino, Italy
Edgar J. Sanchez Carrera
Affiliation:
Department of Economics and Management (DISEI), University of Florence, Firenze, Italy Research Fellow at the Research Center in Applied Mathematics CIMA UAdeC, Saltillo, Mexico
Thomas Seegmuller
Affiliation:
Aix-Marseille University, CNRS, AMSE, Marseille, France
*
Corresponding author: Francesca Grassetti; Email: francesca.grassetti@uniurb.it
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Abstract

This paper studies the dynamic relationship between economic growth, pollution, and government intervention. To do so, we develop a model that links pollution to the economy’s productive capacity, thereby capturing the feedback loops between economic activity, environmental degradation, and fiscal policy intervention. The model incorporates a pollution-sensitive damage function, taxes, and government spending while analyzing economic growth under different levels of government intervention. Therefore, the main paper’s contributions reveal that economies can achieve favorable outcomes with low or moderate government intervention, and that our results underscore the vital role of pollution mitigation policy in dynamically balancing economic growth with environmental sustainability.

Keywords

economic growthpollutionfiscal policypublic debtC61E62Q58O44

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Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e144
Copyright
© The Author(s), 2025. Published by Cambridge University Press

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