Political competition within and between parties: An application to environmental policy
This paper presents a political economy model that is consistent with the low rate of emission taxes in the U.S., as well as the fact that neither Democrats nor Republicans propose to increase them. The voters differ according to their wage and capital incomes. They vote over the emission tax rate and a budgetary rule that specifies how to redistribute the tax proceeds. The political competition is modeled á la Roemer [Roemer, J., 2001. Political Competition: Theory and Applications. Harvard University Press] where the two parties care for the policies they propose as well as the probability of winning; the equilibrium solution concept is the Party Unanimity Nash Equilibrium (PUNE). We calibrate the model using U.S. data and compute the PUNEs numerically. Two types of PUNEs emerge. In one, reflecting the preferences of the militants in the two parties, equilibrium is characterized by both parties proposing a very huge tax rate, with Democrats typically beating the Republicans. In the other, dictated more by the concerns of the opportunists who care most about winning elections, both offer subsidies and both have a chance to win the election.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
- John E. Roemer, 1999.
"The Democratic Political Economy of Progressive Income Taxation,"
Econometric Society, vol. 67(1), pages 1-20, January.
- John E. Roemer, 1997. "The Democratic Political Economy of Progressive Income Taxation," Discussion Papers 97-03, University of Copenhagen. Department of Economics.
- John E. Roemer, . "The Democratic Political Economy Of Progressive Income Taxation," Department of Economics 97-11, California Davis - Department of Economics.
- John Roemer, 2003. "The Democratic Political Economy Of Progressive Income Taxation," Working Papers 9711, University of California, Davis, Department of Economics.
- E. Raphael Branch, 1993. "Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 111-122.
- Levy, Gilat, 2004.
"A model of political parties,"
Journal of Economic Theory,
Elsevier, vol. 115(2), pages 250-277, April.
- Gately, D. & Huntington, H.G., 2001. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," Working Papers 01-01, C.V. Starr Center for Applied Economics, New York University.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2001.
"Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France,"
IDEI Working Papers
127, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2003. "Environmental taxes with heterogeneous consumers: an application to energy consumption in France," Journal of Public Economics, Elsevier, vol. 87(12), pages 2791-2815, December.
- James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
- Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
- Helmuth Cremer & Philippe De Donder & Firouz Gahvari, 2004. "Taxes, Budgetary Rule and Majority Voting," Public Choice, Springer, vol. 119(3_4), pages 335-358, 06.
- Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2005.
"Political competition within and between parties: an application to environmental policy,"
CEPR Discussion Papers
5228, C.E.P.R. Discussion Papers.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2008. "Political competition within and between parties: An application to environmental policy," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 532-547, April.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2005. "Political Competition within and between Parties: An Application to Environmental Policy," IDEI Working Papers 358, Institut d'Économie Industrielle (IDEI), Toulouse.
- Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
- Bos, Dieter, 2000. "Earmarked taxation: welfare versus political support," Journal of Public Economics, Elsevier, vol. 75(3), pages 439-462, March.
- Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
- Marsiliani, Laura & Renstrom, Thomas I, 2000. "Time Inconsistency in Environmental Policy: Tax Earmarking as a Commitment Solution," Economic Journal, Royal Economic Society, vol. 110(462), pages C123-38, March.
- Marcel Boyer & Jean-Jacques Laffont, 1999. "Toward a Political Theory of the Emergence of Environmental Incentive Regulation," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 137-157, Spring.
- Cremer Helmuth & De Donder Philippe & Gahvari Firouz, 2007. "Energy Taxes in Three Political Economy Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-29, July.
- Philippe De Donder, 2000. "Majority voting solution concepts and redistributive taxation," Social Choice and Welfare, Springer, vol. 17(4), pages 601-627.
- Helmuth Cremer & Philippe De Donder & Firouz Gahvari, 2004. "Political Sustainability and the Design of Environmental Taxes," International Tax and Public Finance, Springer, vol. 11(6), pages 703-719, November.
When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:92:y:2008:i:3-4:p:532-547. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.