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Income inequality and the development of environmental technologies

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  • Vona, Francesco
  • Patriarca, Fabrizio

Abstract

Within rich countries, a large dispersion in the capacity of generating environmental innovations appears correlated to the level of inequality. Previous works analyze the relationship between inequality and environmental quality in a static setting. This paper builds a dynamic model more suitable to analyze technological externalities driven by the emergence of a new demand for green products. Under fairly general assumptions on technology and preferences, we show that: 1. the relationship between inequality and environmental innovation is highly non-linear and crucially depends on per-capita income; 2. an excessive inequality harms the development of environmental technologies especially in rich countries. Key to our results is the fact that externalities generated by pioneer consumers of green products benefit the entire population only for relatively low income distances. The empirical analysis robustly confirms our theoretical results, that is: whereas for rich countries inequality negatively affects the diffusion of innovations, per-capita income is paramount in poorer ones.

Suggested Citation

  • Vona, Francesco & Patriarca, Fabrizio, 2011. "Income inequality and the development of environmental technologies," Ecological Economics, Elsevier, vol. 70(11), pages 2201-2213, September.
  • Handle: RePEc:eee:ecolec:v:70:y:2011:i:11:p:2201-2213
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    More about this item

    Keywords

    Inequality Demand Environmental innovations Pioneer consumer;

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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