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Carbon Tax with Individuals’ Heterogeneous Environmental Concerns

Author

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  • Spinesi Luca

    (Department of Economics, University of Rome Tre, Via Silvio d’Amico 77, 00145, Roma, Italy)

Abstract

This study analyzes the effects of carbon taxation and environmental awareness on wage inequality and economic growth. The findings reveal that a stricter carbon tax positively correlates with wage inequality and growth. When R&D firms lack complete control over the magnitude of innovation leaps, a tighter carbon tax exacerbates wage inequality while fostering income growth and green innovation. When firms fully determine their innovation leap, a stricter carbon tax reduces wage inequality and slows GDP growth. Changes in the population’s environmental awareness generate different results. When R&D firms lack complete control over innovation leaps, greater ecological awareness increases wage inequality and GDP growth, but only if green products command a higher markup. When firms fully determine innovation leaps, rising ecological awareness induces a U-shaped effect on the skill premium and an inverted U-shaped effect on the share of unskilled workers, while consistently supporting per capita GDP growth.

Suggested Citation

  • Spinesi Luca, 2025. "Carbon Tax with Individuals’ Heterogeneous Environmental Concerns," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 25(3), pages 681-730.
    • Handle: RePEc:bpj:bejeap:v:25:y:2025:i:3:p:681-730:n:1015
    DOI: 10.1515/bejeap-2025-0022
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    Keywords

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    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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