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This chapter conducts an econometric analysis using a Kaleckian model presented in Chap. 6 in order to understand how environmental measures in Japan have impacted its economic growth. We conduct the analysis on two periods: one centering on 1975–1982 and another from 2001 to 2008, which are set by structural changes indicated by the econometric test.
In the period from 1975 to 1982, it is shown that environmental measures raised the profit rate through significant effects of reducing importation of resources, inducing environmental investments, and enhancing export competitiveness. This shows that the “paradox of costs” for environmental measures worked.
In the period from 2001 to 2008, environmental measures were not so strengthened as to increase their costs, and thus their effect of increasing profit rate was not observed. Under the globalization of the economy, conditions for the paradox of costs became stricter than in the 1970s.
However, it is indicated that if environmental measures are strengthened and the effects of resource saving, inducing investment, and export competitiveness work, their combined effect will likely lead to higher profit rate, realizing Green Growth.
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This assumption is supported by the empirical fact in the 1970s’ Japan that the industries’ pollution abatement expenses were mostly covered by reduction in other costs and profits (Environment Agency 1992).
Results of the Stepwise Chow Test for the rent share function indicate structural changes either in 1982 or in 1985, among which we adopt the former in view of compatibility with other functions.
This model selection is also checked by Akaike information criterion (AIC) or Bayesian information criterion (BIC).
It is noted that there still remains a possibility of the endogeneity problem inherent in simultaneous equation models.
Estimated parameters with a T-ratio of less than 2 are only used as long as their values are plausible and not large enough to disturb the results. For W s , π, u, and v p , average values during the periods are used.
With variables on environmental costs, investment function is estimated with a high coefficient of determination for the period from 1971 to the mid-1980s, without interruption by the oil crisis in 1974. This result is compatible with the established recognition that the growth regime of the postwar golden era reached its limit not at the oil crisis in 1974 but around 1970, indicating the possibility that the growth regime can be more accurately analyzed by incorporating the environmental aspect.
It should be noted that the regimes identified here are not necessarily the same as those identified by analyses on wage and profit, as environmental costs are not directly saved and their effects are not completely the same as those of wages.
In this period, the parameter of wages in the saving function is estimated to be very small, without statistical significance. This result may be affected by the simultaneous fall of profit and savings in 2008. If this parameter took a larger value, F r would become smaller, making this condition of cost-recovery rate larger. Even in this case, the main results of this book would not be affected.
The most important element of the cost-demand effect is higher total wages caused by more employment in environmental sectors (the ESGS sector). Advocates of the “Green New Deal” or “Green Growth” often emphasize the effects of job creation. The result of our analysis indicates that higher employment in the environmental sectors alone will probably not enable higher growth. However, higher employment should still have significant importance when taking into consideration the aspects of social stability, as well as the long-term productivity improved by working experiences.
Blecker RA (2002) Distribution, demand and growth in neo-Kaleckian macro models. In: Setterfield M (ed) The economics of demand-led growth: challenging the supply-side vision of the long run. Edward Elgar, Northampton, pp 129–152
Central Environment Policy Council (2010) Interim report on vision of policies and measures to achieve the mid- to long-term emission reduction targets (in Japanese). http://www.env.go.jp/council/06earth/y0611-19.html. Accessed 25 Nov 2016
Environment Agency (1992) Quality of the environment in Japan, 1992. Environment Agency, Tokyo
Okuma K (2016) Long-term transformation of the economy–environment nexus in Japan: a historical analysis of environmental institutions and growth regimes based on the regulation theory. Evol Inst Econ Rev 13:217–237 CrossRef
- Econometric Analysis of the Impacts of Environmental Measures on Growth
- Springer Singapore
- Chapter 8
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