On Income Inequality and Green Preferences* (original) (raw)
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Voting for Environmental Policy Under Income and Preference Heterogeneity
American Journal of Agricultural Economics, 2008
We examine the design of policies for promoting the consumption of green products under preference and income heterogeneity using organic food products as an example. Two instruments are considered: a price subsidy for the organic food products and a tax on the conventional products.
Environmental Taxes, Inequality and Technical Change
Revue de l'OFCE, 2012
Environmental innovations heavily depend on government policies and consumers' behaviour. This paper addresses the issue of how these two factors interact in shaping the transition to a green technology. We extend models of technological selection with heterogeneous agents and learning by including a weak hierarchy between green and polluting goods. For general distributions of agents' income and the explicit inclusion of a carbon tax, the model is not analytically tractable so we derive our results using numerical simulations. Given the level of income, carbon taxes are generally more effective when technological improvements brought about by wealthy pioneer consumers suffice in inducing the remaining population to buy the green good. A negative relationship between income inequality and tax effectiveness emerges. Taxes on polluting production have a regressive effect since they are mainly paid by poorer people who consume less of the green good. For these people, a negative wealth effect strongly contrasts the standard substitution effect of the tax. Finally, both lowering inequality and taxation have the expected effect for intermediate level of the learning parameter. We assume that each good is produced with only one technology. Green (resp. non-green) goods are produced using a technology with low-(resp. high-) environmental impact.
Inequality, Environmental Protection and Growth
SSRN Electronic Journal, 2000
We analyze how, in representative democracies, income distribution influences the stringency of environmental policy and economic growth. Individuals (who differ in abilities) live for two periods, working when young and owning capital when old. Externalities are caused by a polluting factor. The revenue from pollution taxation, as well as capital-income taxation, is redistributed lump-sum to the old. The fiscal decision, at each point in time, is taken by a majority elected representative. In politico-economic equilibrium, more inequality (in terms of the skewness of the distribution) yields a lower pollution tax, a larger capital tax, and lower growth.
Democratisation, Environmental and Income Inequality.
Empirical economists commonly agree upon the fact that the demand for environmental goods is increasing with income, so as long as democratisation shifts the decisive power from a rich individual (autocrat or dictator) to a poorer one (decisive voter), such a regime change should be associated to worse environmental conditions. Assuming that citizens' wealth does not depend on inherited endowments, but only on each individual's share on total production, I will show with a theoretical model that contrary to the expectations, democratisation may have mixed effects on the level of environmental quality, depending on the size of the price and income effects on the demand for environmental quality associated to a decrease in the decisive political actor's wealth. If indeed a poorer individual desires less environmental quality than a richer individual (income effect), he also desires less of the goods responsible for degradation (price effect) so the overall result on the environment is ambiguous. Assuming instead that society is composed by two classes of individuals, one supplying an embodied factor of production and one supplying capital, and assuming moreover that the decisive voter belongs to the first class of individuals while the autocrat does not, democratisation is shown to be beneficial for the environment, the better the effect on the environment, the bigger the difference in wealth between the two decisive political actors.
We study the political economy of the environment in autocratic, weak and strong democracies when individuals can either mitigate the health consequences of domestic pollution privately or reduce pollution collectively through public policy. The setting is that of a small open economy in which incomes depend importantly on trade in dirty goods, where income inequality and the degree to which ordinary citizens exert voice in each dimension of the policy process distinguishes elites and ordinary citizens. The recognition that the health consequences of pollution can be dealt with privately at a cost adds an important dimension to the analysis of the political economy of environmental regulation, especially for an open economy. When private mitigation is feasible, inequality of incomes leads to an unequal distribution of the health burden of pollution (in accordance with the epidemiologic evidence), thus polarizing the interests of citizens in democracies and of ordinary citizens and elites in non-democratic regimes. Inequality in the willingness to bear the cost of private mitigation in turn interacts with the pollution costs and income benefits of trade in dirty goods to further polarize interests concerning both environmental stringency and the regulation of trade openness. In this context, we show how the eco-friendliness ranking of different political regimes varies with the cost of private mitigation and with the extent of income inequality, tending to converge when mitigation costs are high, and even producing a ranking reversal between democracies and autocracies, and between weak and strong democracies, when costs lie in an intermediate range.
Political and economic inequality and the environment
1998
This paper analyzes and tests the hypothesis that political and economic equality result in lower levels of environmental degradation. Based on formal statements of the argument put forward by Boyce, R., 1994, Ecological Economics, 11, 169-178, I show that equality may or may not be necessary to minimize degradation. Under some plausible conditions, greater inequality may even be conducive to lower degradation. Actual results depend primarily on the intersection between the distribution of preferences across groups and the institutional rules. Two cross-national empirical tests tend to support the contention that distributional issues do not systematically explain variations in environmental quality. The results reinforce the conclusion that assumptions about the structure of preferences and workings of social choice institutions ignore complex interactions which influence the relationship between degradation and equality.
Environmental Tax Reform and Income Distribution with Imperfect Heterogeneous Labour Markets
European Economic Review
This paper investigates the distributional and efficiency consequences of an environmental tax reform, when the revenue from the green tax is recycled by varying labor tax rates. We build a general equilibrium model with imperfect heterogeneous labor markets, pollution consumption externalities, and non-homothetic preferences (Stone-Geary utility). We show that in the case where the reform appears to be regressive, the gains from the double dividend can be made Pareto improving by using a redistributive non-linear income tax if redistribution is initially not too large. Moreover, the increase of progressivity acts on unemployment and can moderate the trade-off between equity and efficiency. We finally provide numerical illustrations for three European countries featuring different labor market behaviors. We show that a double dividend may be obtained without worsening the initial inequalities if the green tax revenues are redistributed with a progressivity index lower for UK than for France and Germany.
Democracy, Inequality and the Environment when Citizens can Mitigate Privately or Act Collectively
2010
We study the political economy of the environment in autocratic, weak and strong democracies when individuals can either mitigate the health consequences of domestic pollution privately or reduce pollution collectively through public policy. The setting is that of a small open economy in which incomes depend importantly on trade in dirty goods, where income inequality and the degree to which ordinary citizens exert voice in each dimension of the policy process distinguishes elites and ordinary citizens. The recognition that the health consequences of pollution can be dealt with privately at a cost adds an important dimension to the analysis of the political economy of environmental regulation, especially for an open economy. When private mitigation is feasible, inequality of incomes leads to an unequal distribution of the health burden of pollution (in accordance with the epidemiologic evidence), thus polarizing the interests of citizens in democracies and of ordinary citizens and elites in non-democratic regimes. Inequality in the willingness to bear the cost of private mitigation in turn interacts with the pollution costs and income benefits of trade in dirty goods to further polarize interests concerning both environmental stringency and the regulation of trade openness. In this context, we show how the eco-friendliness ranking of different political regimes varies with the cost of private mitigation and with the extent of income inequality, tending to converge when mitigation costs are high, and even producing a ranking reversal between democracies and autocracies, and between weak and strong democracies, when costs lie in an intermediate range.
Second-Best Pollution Taxes and the Structure of Preferences
2001
We characterize optimal taxes on polluting and nonpolluting goods in Ramsey and Mirrlees second-best environments. The polluting good tax differs from the Pigouvian tax by Ramsey terms in the first and by Stiglitz/Mirrlees plus another adjustment term in the second. These terms can be positive, negative, or zero. If preferences are weakly separable in public and private goods, with the
The Social Aversion to Intergenerational Inequality and the Recycling of a Carbon Tax
2014
Redistributing the income of a carbon tax impacts the economic activity and the intergenerational inequality, which both influence the intertemporal social welfare. Thus the way a social planner recycles a carbon tax is influenced by its degree of aversion to intergenerational inequality. This article analyses the effect of social aversion to intergenerational inequality on the social choice as concerns implementing and redistributing a carbon tax. It relies on a detailed computable general equilibrium model with overlapping generations and an energy module, with a parameterisation on empirical data. We use two types of social welfare functionals which both incorporate a variable parameter measuring the degree of aversion of the social planner to intergenerational inequality. Results suggest that the social planner recycles a carbon tax through higher public expenditures if its aversion to intergenerational inequity is relatively high. This holds even if recycling through lower income taxes increases activity.