Environmental multipliers for circular flow–positive-profit economies: formulation, implications and empirical illustration

Abstract

This paper formulates an environmental extension of the Kurz matrix demand multipliers for circular flow–positive-profit economies and, thus, provides a theoretical and empirical integration of income distribution–value, trade, effective demand and ‘green policy’ considerations. The findings highlight the complex ways in which environmental multiplier effects depend on the technical conditions of production, distributive variables, relative commodity prices, savings ratios out of wages and profits, direct and indirect tax rates, patterns of household consumption demand, physical composition of autonomous demand, and ultimately on the resulting socio-technical inter-country ‘backward’ linkages and leakages. On the one hand, then, the overall findings of this paper challenge the effectiveness of traditional effective demand management and environmental tax policies to reduce pollutant emissions, energy use or/and unemployment. On the other hand, however, they suggest an alternative, fairly general and flexible framework for studying environmental multiplier effects at the level of individual industries and sectors, both nationally and transnationally.