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Electoral competition with environmental policy as a second best transfer

  • Kawahara, Shinya
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    Abstract This paper explains why some governments fail to adopt policies that are sufficiently strong, while others adopt policies that are too stringent. Constructing a political economy model in which voters face uncertainty due to the types of politicians and the risk of environmental damage, we show that there is an equilibrium in which a politician uses a weaker environmental policy rather than efficient direct transfers for redistribution. We also show that there is an equilibrium in which a stricter environmental policy can be implemented by a politician who has no incentive to make transfers. Then, we discuss which equilibrium should be more plausible. We conclude that the latter equilibrium in which a too stringent environmental policy emerges can dominate the former unless the citizen's estimate of environmental risk is sufficiently low.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0928765510000631
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    Article provided by Elsevier in its journal Resource and Energy Economics.

    Volume (Year): 33 (2011)
    Issue (Month): 3 (September)
    Pages: 477-495

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    Handle: RePEc:eee:resene:v:33:y:2011:i:3:p:477-495
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

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    14. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
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