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Dynamics of Environmental Regulation and Voters’ Biased Beliefs: A Political Economy Approach

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  • Louis Jaeck

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  • Gilbert Bougi

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Abstract

This paper develops a political economy model which determines the conditions of cycles in environmental regulation. It analyzes the impact of both interest groups and voters who have biased political beliefs. Such biased beliefs are the result of the influence of activist interest groups that strategically use the beliefs formation process among ignorant voters (cascade effect). The cascade effect biases the perception of the efficiency of regulatory instruments and affects the behavior of the politician. Our model seems particularly relevant to explain the evolution of environmental policies, which are characterized by scientific controversies, such as climate change policies. The high media coverage of climate issues, as well as persistent debates among experts, is a favorable context for the influence of activist interest groups that use the public’s cognitive biases. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Louis Jaeck & Gilbert Bougi, 2010. "Dynamics of Environmental Regulation and Voters’ Biased Beliefs: A Political Economy Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 399-409, December.
  • Handle: RePEc:kap:atlecj:v:38:y:2010:i:4:p:399-409
    DOI: 10.1007/s11293-010-9243-1
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    File URL: http://hdl.handle.net/10.1007/s11293-010-9243-1
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    References listed on IDEAS

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    1. Bruno S. Frey & Susanne Neckermann, 2008. "Awards: A view from psychological economics," IEW - Working Papers 357, Institute for Empirical Research in Economics - University of Zurich.
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    More about this item

    Keywords

    Environmental regulation; Political economy; Collective beliefs; D78; H23; Q28;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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