The political economy of climate policy
This paper analyzes the political economy of climate policy in a simple framework with asymmetric information between voters and politicians. Two parties are engaged in electoral competition and announce policy platforms. An environmental catastrophe (e.g., a tipping point in the climate system) is approaching with some probability that depends on the state of nature. Climate policy can reduce this probability. Each party receives a private signal about the true state of nature, whereas voters possess little information and only know the prior probability distribution. We analyze under what conditions parties can reveal their private signals truthfully to the voters under electoral competition, and when the implemented policy is optimal, given the available information.
|Date of creation:||08 Oct 2015|
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