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

  • Louis Jaeck

    ()

  • Gilbert Bougi

    ()

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    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

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    File URL: http://hdl.handle.net/10.1007/s11293-010-9243-1
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    Article provided by Springer & International Atlantic Economic Society in its journal Atlantic Economic Journal.

    Volume (Year): 38 (2010)
    Issue (Month): 4 (December)
    Pages: 399-409

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    Handle: RePEc:kap:atlecj:v:38:y:2010:i:4:p:399-409
    DOI: 10.1007/s11293-010-9243-1
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    1. Thomas A. Barthold, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 133-151, Winter.
    2. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    3. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May.
    4. Julien Hanoteau, 2004. "Lobbying pour les permis négociables et non-neutralité du mode d'allocation," Revue économique, Presses de Sciences-Po, vol. 55(3), pages 517-525.
    5. Bruno S. Frey & Susanne Neckermann, 2008. "Awards - A View From Psychological Economics," CREMA Working Paper Series 2008-15, Center for Research in Economics, Management and the Arts (CREMA).
    6. R. Damania, 1999. "Political Competition, Rent Seeking and the Choice of Environmental Policy Instruments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(4), pages 415-433, June.
    7. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
    8. Kuran, Timur, 1990. "Private and Public Preferences," Economics and Philosophy, Cambridge University Press, vol. 6(01), pages 1-26, April.
    9. Brady, Gordon L & Clark, J R & Davis, William L, 1995. "The Political Economy of Dissonance," Public Choice, Springer, vol. 82(1-2), pages 37-51, January.
    10. Dijkstra, Bouwe R., 1998. "A two-stage rent-seeking contest for instrument choice and revenue division, applied to environmental policy," European Journal of Political Economy, Elsevier, vol. 14(2), pages 281-301, May.
    11. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
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