LAUSR

Abstract In macroeconomic analyses usually a simple proportional trade-off between economic growth and environmental pressure is assumed, i.e. constant return to scale (CRS). In this study authors show how changing CRS assumption affects environmental policy effectiveness based on Polish example. The problem revealed in the conducted analysis is actual in many countries, where the local perspective may efface global threats. The empirical objective of this paper is to assess cost-effectiveness of environmental policies at the county level under various return to scale (RTS) scenarios. First, environmental pressure was measured in four dimensions: air, soil, water pollution and bio-uniformity; second, the double-bootstrapped truncated regression model under different RTS were estimated, verifying the cost-effectiveness of county and transnational policies. The results send a message that the adoption of CRS assumption recommended in a such case by literature and usually followed by local authorities may lead to misleading assessment of the eco-efficiency level. It was found that local policy loses its impact on the eco-efficiency under VRS and 40% of local authorities in Poland can no longer benefit from economies of scale. The article offers original methodology, first, for measuring eco-efficiency in macroeconomic approach, second, a frontier-based cost-effectiveness analysis (CEA), adopting the double-bootstrapped modelling procedure.