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Is inequality harmful for the environment in a growing economy ?

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Abstract

In this paper we investigate the relationship between inequality and the environment in a growing economy from a political economy perspective. We consider an endogenous growth economy, where growth generates pollution and a deterioration of the environment. Public expenditures may either be devoted to supporting growth or abating pollution. The decision over the public programs is done in a direct democracy, with simple majority rule. We prove that the median voter is decisive and show that inequality is harmful for the environment : the poorer the median voter relative to the average individual, the less she will tax and devote resources to the environment, preferring to support growth.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2006/V06045.pdf
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Bibliographic Info

Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v06045.

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Length: 19 pages
Date of creation: Sep 2005
Date of revision: May 2006
Handle: RePEc:mse:wpsorb:v06045

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Keywords: Inequality; growth; environmental policy; political economy;

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References

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  1. Larry E. Jones & Rodolfo E. Manuelli, 2000. "Endogenous policy choice: the case of pollution and growth," Staff Report 276, Federal Reserve Bank of Minneapolis.
  2. James Andreoni & Arik Levinson, 1998. "The Simple Analytics of the Environmental Kuznets Curve," NBER Working Papers 6739, National Bureau of Economic Research, Inc.
  3. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  4. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  5. Fiaschi, Davide, 1999. "Growth and inequality in an endogenous fiscal policy model with taxes on labor and capital," European Journal of Political Economy, Elsevier, vol. 15(4), pages 727-746, November.
  6. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  7. Hubert Kempf & Stéphane Rossignol, 2005. "Growth, Inequality, and Integration: A Political Economy Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 709-739, December.
  8. Beverly Hirtle, 2008. "Credit derivatives and bank credit supply," Staff Reports 276, Federal Reserve Bank of New York.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  10. Khan, M. & Matsusaka, J.G., 1995. "Demand for Environment Goods: Evidence from Voting Patterns on California Initiatives," Discussion Papers 1995_08, Columbia University, Department of Economics.
  11. Marsiliani, L. & Renstrom, T.I., 2000. "Inequality, Environmental Protection and Growth," Discussion Paper 2000-34, Tilburg University, Center for Economic Research.
  12. Earnhart, Dietrich, 1997. "Enforcement of Environmental Protection Laws under Communism and Democracy," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 377-402, October.
  13. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  14. Magnani, Elisabetta, 2000. "The Environmental Kuznets Curve, environmental protection policy and income distribution," Ecological Economics, Elsevier, vol. 32(3), pages 431-443, March.
  15. Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
  16. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  17. Torras, Mariano & Boyce, James K., 1998. "Income, inequality, and pollution: a reassessment of the environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 25(2), pages 147-160, May.
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Citations

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Cited by:
  1. Francesco Vona & Fabrizio Patriarca, 2010. "Income Inequality and the Development of Environmental Technologies," Documents de Travail de l'OFCE 2010-22, Observatoire Francais des Conjonctures Economiques (OFCE).
  2. Hubert Kempf & Stéphane Rossignol, 2010. "National Politics and International Agreements," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00497463, HAL.
  3. Francesco Vona & Francesco Nicolli, 2013. "Energy market liberalisation and renewable energy policies in OECD countries," Sciences Po publications 2013-10, Sciences Po.
  4. Vincent Anesi & Philippe De Donder, 2011. "Secondary issues and party politics: an application to environmental policy," Social Choice and Welfare, Springer, vol. 36(3), pages 519-546, April.
  5. Phu Nguyen-Van & Thi Kim Cuong Pham, 2008. "Endogenous Fiscal Policies, Environmental Quality, and Status-Seeking Behavior," Working Papers 29, Development and Policies Research Center (DEPOCEN), Vietnam.
  6. Francesco Nicolli & Francesco Vona, 2012. "The evolution of renewable energy policy in Oecd countries:aggregate indicators and determinants," Documents de Travail de l'OFCE 2012-13, Observatoire Francais des Conjonctures Economiques (OFCE).
  7. Kirill Borissov & Thierry Brechet & Stephane Lambrecht, 2012. "Environmental maintenance in a dynamic model with heterogenous agents," EUSP Deparment of Economics Working Paper Series Ec-02/12, European University at St. Petersburg, Department of Economics.

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