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Inequality, Environmental Protection and Growth

Author

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  • Laura Marsiliani

    (W. Allen Wallis Institute of Political Economy, University of Rochester)

  • Thomas Renstrom

    (W. Allen Wallis Institute of Political Economy, University of Rochester and CEPR)

Abstract

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.

Suggested Citation

  • Laura Marsiliani & Thomas Renstrom, 2002. "Inequality, Environmental Protection and Growth," Wallis Working Papers WP35, University of Rochester - Wallis Institute of Political Economy.
    • Handle: RePEc:roc:wallis:wp35
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    References listed on IDEAS

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    Cited by:

    1. Lin Guo, 2017. "Income Inequality, Household Consumption And Co2 Emissions In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 531-553, June.

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    More about this item

    Keywords

    Environmental policy; redistribution; inequality; political economy; growth.;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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