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The political economy of climate policy

Listed author(s):
  • Robert C. Schmidt

    ()

    (Humboldt-Universitaet zu Berlin)

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    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.

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    File URL: http://repec.bdpems.de/repec/bdp/wpaper/pdf/WP_2015-15.pdf
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    Paper provided by Berlin Doctoral Program in Economics and Management Science (BDPEMS) in its series Working Papers with number 2015015.

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    Date of creation: 08 Oct 2015
    Handle: RePEc:bdp:wpaper:2015015
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    Humboldt-Universität zu Berlin, School of Business and Economics, Spandauer Straße 1, D-10099 Berlin

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    Web page: http://repec.bdpems.de/repec/bdp/wpaper/
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    1. In-Koo Cho & David M. Kreps, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 179-221.
    2. Alberto Alesina & Alex Cukierman, 1990. "The Politics of Ambiguity," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 829-850.
    3. Christian Schultz, 1996. "Polarization and Inefficient Policies," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 331-344.
    4. Shapiro, Jesse M., 2016. "Special interests and the media: Theory and an application to climate change," Journal of Public Economics, Elsevier, vol. 144(C), pages 91-108.
    5. Timothy Feddersen & Wolfgang Pesendorfer, 1997. "Voting Behavior and Information Aggregation in Elections with Private Information," Econometrica, Econometric Society, vol. 65(5), pages 1029-1058, September.
    6. Gratton, Gabriele, 2014. "Pandering and electoral competition," Games and Economic Behavior, Elsevier, vol. 84(C), pages 163-179.
    7. Mike Felgenhauer, 2012. "Revealing information in electoral competition," Public Choice, Springer, vol. 153(1), pages 55-68, October.
    8. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January.
    9. Banks, Jeffrey S., 1990. "A model of electoral competition with incomplete information," Journal of Economic Theory, Elsevier, vol. 50(2), pages 309-325, April.
    10. Martinelli, Cesar, 2001. "Elections with Privately Informed Parties and Voters," Public Choice, Springer, vol. 108(1-2), pages 147-167, July.
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