Voting for environmental policy under income and preference heterogeneity
We examine the design of policies for promoting the consumption of green products under preference and income heterogeneity using organic food products as an example. Two instruments are considered: a price subsidy for the organic food products and a tax on the conventional products. Under income disparity, consumers with high income always prefer a socially optimal subsidy to a socially optimal tax, while low-income consumers prefer a tax on conventional products. When environmental policy is determined by the median voter, the policies implemented tend to be stricter than socially optimal policies if income differences are large.
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