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Inequality, Environmental Protection and Growth

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  • Renström, Thomas I
  • Marsiliani, Laura

Abstract

We analyse how, in representative democracies, income distribution influences the stringency of environmental policy and economic growth. Individuals (who differ in abilities) live for two periods, working when young and owning capital when old. Externalities are caused by a polluting factor. The revenue from pollution taxation, as well as capital-income taxation, is redistributed in a lump-sum to the old. A majority-elected representative takes the fiscal decision, at each point in time. In politico-economic equilibrium, more inequality (in terms of the skewedness of the distribution) yields a lower pollution tax, a larger capital tax, and lower growth.

Suggested Citation

  • Renström, Thomas I & Marsiliani, Laura, 2003. "Inequality, Environmental Protection and Growth," CEPR Discussion Papers 3754, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3754
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    References listed on IDEAS

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    Cited by:

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    2. Grunewald, Nicole & Klasen, Stephan & Martínez-Zarzoso, Inmaculada & Muris, Chris, 2017. "The Trade-off Between Income Inequality and Carbon Dioxide Emissions," Ecological Economics, Elsevier, vol. 142(C), pages 249-256.
    3. Wan, Guanghua & Wang, Chen & Wang, Jinxian & Zhang, Xun, 2022. "The income inequality-CO2 emissions nexus: Transmission mechanisms," Ecological Economics, Elsevier, vol. 195(C).
    4. Faugère, Christophe, 2014. "Ruthless compassion in banking and finance," Research in International Business and Finance, Elsevier, vol. 32(C), pages 106-121.
    5. Henninger, Ella & Smith, E. Keith, 2024. "Beyond the haze: Decomposing the effect of economic inequality on global air quality from 2000 to 2020," Ecological Economics, Elsevier, vol. 222(C).

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    More about this item

    Keywords

    Environmental policy; Redistribution; Inequality; Political economy; Growth;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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