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Electoral competition with environmental policy as a second best transfer

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  • Kawahara, Shinya
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    Abstract

    Abstract This paper explains why some governments fail to adopt policies that are sufficiently strong, while others adopt policies that are too stringent. Constructing a political economy model in which voters face uncertainty due to the types of politicians and the risk of environmental damage, we show that there is an equilibrium in which a politician uses a weaker environmental policy rather than efficient direct transfers for redistribution. We also show that there is an equilibrium in which a stricter environmental policy can be implemented by a politician who has no incentive to make transfers. Then, we discuss which equilibrium should be more plausible. We conclude that the latter equilibrium in which a too stringent environmental policy emerges can dominate the former unless the citizen's estimate of environmental risk is sufficiently low.

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    Bibliographic Info

    Article provided by Elsevier in its journal Resource and Energy Economics.

    Volume (Year): 33 (2011)
    Issue (Month): 3 (September)
    Pages: 477-495

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    Handle: RePEc:eee:resene:v:33:y:2011:i:3:p:477-495

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    Web page: http://www.elsevier.com/locate/inca/505569

    Related research

    Keywords: Environmental policy Political competition Asymmetric information;

    References

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    1. Kenneth Rogoff, 1990. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
    2. Polk, Andreas & Schmutzler, Armin, 2005. "Lobbying against environmental regulation vs. lobbying for loopholes," European Journal of Political Economy, Elsevier, vol. 21(4), pages 915-931, December.
    3. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, October.
    4. Schleich, Joachim, 1999. "Environmental quality with endogenous domestic and trade policies1," European Journal of Political Economy, Elsevier, vol. 15(1), pages 53-71, March.
    5. Cropper, Maureen L. & William N. Evans & Stephen J. Berard & Maria M. Ducla-Soares & Paul R. Portney, 1992. "The Determinants of Pesticide Regulation: A Statistical Analysis of EPA Decision Making," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 175-97, February.
    6. Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
    7. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May.
    8. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    9. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
    10. Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
    11. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, October.
    12. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
    13. Donald N. Dewees & Michael J. Hare, 1998. "Economic Analysis of Packaging Waste Reduction," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 453-470, December.
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    Cited by:
    1. Johannes Urpelainen, 2012. "How do electoral competition and special interests shape the stringency of renewable energy standards?," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(1), pages 23-34, January.
    2. Alberto F. Alesina & Francesco Passarelli, 2010. "Regulation Versus Taxation," NBER Working Papers 16413, National Bureau of Economic Research, Inc.

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