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Environmental maintenance in a dynamic model with heterogenous agents

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  • BORISSOV, Kirill

    ()
    (Saint-Petersburg Institute for Economics and Mathematics (RAS) and European University at St. Petersburg, Russia)

  • BRECHET, Thierry

    ()
    (Université catholique de Louvain, CORE and Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium)

  • LAMBRECHT, Stéphane

    ()
    (Université de Valenciennes et du Hainaut-Cambrésis and Laboratoire EQUIPPE, Université de Lille 1, France; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

We assume a population of infinitely-lived households of the economy split into two groups : one with a high discount factor (the patient) and one with a low one (the impatient). The environmental quality is deteriorated by firm's polluting emissions. The governmental policy consists in proposing households to vote for a tax aimed at environmental maintenance. We study the voting equilibrium at steady states. The resulting equilibrium maintenance is the one of the median voter. We show that (i) an increase in total factor productivity may produce effects described by the Environmental Kuznets Curve, (ii) an increase in the patience of impatient households may foster environmental quality if the median voter is impatient and maintenance positive, (iii) a decrease in inequality among the patient households leads to an increase in environmental quality if the median voter is patient and maintenance is positive. We also show that, if the median income is lower than the mean, our model predict lower level of environmental quality than the representative agent model, and that increasing public debt decreases the level of environmental quality.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2012008.

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Date of creation: 08 Mar 2012
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Handle: RePEc:cor:louvco:2012008

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Keywords: intertemporal choice and growth; discounting; government environmental policy; externalities; environmental taxes; voting equilibrium;

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