Environmental adjustment of the EU27 GDP: an econometric quantitative model

Abstract The use of natural resources as an input to economic growth and the interactions between ecological systems have resulted in accumulation environmental externalities. This can negatively affect future levels welfare growth. In this paper, such dynamics are assessed quantified by introducing explicit externality variables a production function. is performed endogenous model where cumulative externalities interact with Using efficiency analysis, dynamic econometric estimated showing significance negative influence past on GDP over broad range stochastic frontier analysis estimations. results applied propose alternative specification function modelling tool used European Commission for assessment climate policies Union. findings show that observed overestimated when not considered.