The Relationship Between Public Expenditures and the Green Economy: An Empirical Analysis Focusing on E7 and D8 Countries

Public expenditures, undertaken to meet collective needs, exert a significant influence across various economic domains, including production, consumption, investment, resource allocation, national income, and economic development. Positioned at the core of sustainable development, the green economy model plays a crucial role in fostering societal progress by ensuring environmental sustainability for a better future. Within this framework, this study aims to examine the impact of public expenditures on green development in E7 and D8 countries during the period 2010–2023. The Driscoll-Kraay (DK) standard error model was employed for the empirical analysis. The findings reveal that public sector spending on environmental protection and infrastructure investments, along with total natural resource rents, has a positive and statistically significant impact on the Sustainable Development Index, a key indicator of the green economy. Furthermore, the results indicate that public expenditures aimed at mitigating environmental threats contribute more effectively to the advancement of the green economy in D8 countries than in E7 countries. Empirical studies analyzing the relationship between public expenditures and the green economy within the context of the selected countries remain scarce in the literature. In this regard, the present study is expected to make a significant contribution by elucidating the role of public expenditures—an essential driver of sustainable development—in shaping the green economy.