Approaches like CGE enable economists to identify how effects in a particular economic sector extend to income and employment in other sectors. The approaches comprise feedback loops to structure longer-range effects, especially the way capital investments behave in response to changes in supply and demand in various sectors. Yet, the outcomes of CGE approaches should be analyzed with care (Hussen, 2012, 110):CGE models have to predict reduced economic growth because of environmental compliance. After all, pollution control costs in these models are treated as extra expenditures necessary to produce the same level of valued output… The outcome is implicit in how the model is constructed. So this finding isn’t necessarily a complete picture for what people and policymakers want to know about real world regulation, where a pollution control sector emerges as part of the economy, and helps to produce environmental protection, which is also an ‘output’ with value.CGE approaches do not calculate the gains from regulation, especially those that do not surface in markets. CGE approaches are also unable to represent positive feedback loops like the rise in the rate of productivity as detrimental health effects decrease with higher water and air quality (Yan & Carr, 2013).Hence, although there seems to be a slight adverse effect of environmental regulation on economic development as usually assessed, there is a need for a more thorough calculation and assessment to find out its impact on social welfare (Spatareanu, 2007). Based on traditional statistical significance test, there is no significant correlation between state economic growth and state environmental regulation in either booming or recessive economic periods. In view of this, environmental nonintervention cannot be presumed to generate quantifiable economic gains at the state level. Although individual industries, businesses, and companies may acquire particular gains, the general effect on the economy at the state level will not be obvious. This finding is in line with earlier studies by other researchers (Bennett, 1999).On the one hand tough environmental regulation appears to be related to greater economic growth during times of national economic boom. Tough environmental regulation, on the other hand, appears to be related to poorer economic performance during times of depression. Hence, there are
Bennett, P. (1999). Governing environmental risk: regulation, insurance and moral economy. Progress in Human Geography, 23(2), 189-208.
Hussen, A. (2012). Principles of Environmental Economics and Sustainability: An Integrated Economic and Ecological Approach. UK: Routledge.
Konisky, D. (2008). Bureaucratic and Public Attitudes toward Environmental Regulation and the Economy. State and Local Government Review, 40(3), 139-149.
Spatareanu, M. (2007). Searching for Pollution Havens: The Impact of Environmental Regulations on Foreign Direct Investment. The Journal of Environment & Development, 16(2), 161-182.
Thomas, W. (2009). Do Environmental Regulations Impede Economic Growth? A Case Study of the Metal Finishing Industry in the South Coast Basin of Southern California. Economic Development Quarterly, 23(4), 329-341.
Yan, W. & Carr, D. (2013). Federal Environmental Regulation Impacts on Local Economic Growth and Stability. Economic Development Quarterly, 27(3), 179-192.
Please type your essay title, choose your document type, enter your email and we send you essay samples