Political competition within and between parties: an application to environmental policy
This paper presents a political economy model that explains the low rate of emission taxes in the U.S., as well as the fact that neither Democrats nor Republicans propose to increase them. The voters differ according to their wage and capital incomes which are assumed to have a bivariate lognormal distribution. They vote over the emission tax rate and a budgetary rule that specifies how to redistribute the tax proceeds. The political competition is modeled à la Roemer (2001) where the two parties care for the policies they propose as well as the probability of winning; the equilibrium solution concept is the Party Unanimity Nash Equilibrium (PUNE). We calibrate the model using U.S. data and compute the PUNEs numerically. Two main results emerge. All "viable" PUNEs entail subsidies on emissions (as opposed to taxes). This indicates the importance of distributional concerns in garnering political support for environmental policies. Second, parties always propose an interior value for the budgetary rule even though all citizens prefer extreme values. This illustrates the emergence of political compromise to attract voters.
|Date of creation:||Sep 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Roemer, 2003.
"The Democratic Political Economy Of Progressive Income Taxation,"
9711, University of California, Davis, Department of Economics.
- John E. Roemer, 1999. "The Democratic Political Economy of Progressive Income Taxation," Econometrica, Econometric Society, vol. 67(1), pages 1-20, January.
- John E. Roemer, 1997. "The Democratic Political Economy of Progressive Income Taxation," Discussion Papers 97-03, University of Copenhagen. Department of Economics.
- John E. Roemer, . "The Democratic Political Economy Of Progressive Income Taxation," Department of Economics 97-11, California Davis - Department of Economics.
- Gately, D. & Huntington, H.G., 2001. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," Working Papers 01-01, C.V. Starr Center for Applied Economics, New York University.
- Cremer Helmuth & De Donder Philippe & Gahvari Firouz, 2007. "Energy Taxes in Three Political Economy Models," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-29, July.
- Marcel Boyer & Jean-Jacques Laffont, 1999. "Toward a Political Theory of the Emergence of Environmental Incentive Regulation," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 137-157, Spring.
- Helmuth Cremer & Philippe De Donder & Firouz Gahvari, 2004. "Taxes, Budgetary Rule and Majority Voting," Public Choice, Springer, vol. 119(3_4), pages 335-358, 06.
- Laslier, Jean-Francois & Picard, Nathalie, 2002. "Distributive Politics and Electoral Competition," Journal of Economic Theory, Elsevier, vol. 103(1), pages 106-130, March.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2005.
"Political competition within and between parties: an application to environmental policy,"
CEPR Discussion Papers
5228, C.E.P.R. Discussion Papers.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2008. "Political competition within and between parties: An application to environmental policy," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 532-547, April.
- Cremer, Helmuth & De Donder, Philippe & Gahvari, Firouz, 2005. "Political Competition within and between Parties: An Application to Environmental Policy," IDEI Working Papers 358, Institut d'Économie Industrielle (IDEI), Toulouse.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2001.
"Environmental Taxes with Heterogeneous Consumers: An Application to Energy Consumption in France,"
IDEI Working Papers
127, Institut d'Économie Industrielle (IDEI), Toulouse, revised 2002.
- Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2003. "Environmental taxes with heterogeneous consumers: an application to energy consumption in France," Journal of Public Economics, Elsevier, vol. 87(12), pages 2791-2815, December.
- Brett, Craig & Keen, Michael, 2000. "Political uncertainty and the earmarking of environmental taxes," Journal of Public Economics, Elsevier, vol. 75(3), pages 315-340, March.
- Levy, Gilat, 2004.
"A model of political parties,"
Journal of Economic Theory,
Elsevier, vol. 115(2), pages 250-277, April.
- Helmuth Cremer & Philippe De Donder & Firouz Gahvari, 2004. "Political Sustainability and the Design of Environmental Taxes," International Tax and Public Finance, Springer, vol. 11(6), pages 703-719, November.
- Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
- Bos, Dieter, 2000. "Earmarked taxation: welfare versus political support," Journal of Public Economics, Elsevier, vol. 75(3), pages 439-462, March.
- Fullerton, Don, 1991. "Reconciling Recent Estimates of the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 302-08, March.
- Marsiliani, Laura & Renstrom, Thomas I, 2000. "Time Inconsistency in Environmental Policy: Tax Earmarking as a Commitment Solution," Economic Journal, Royal Economic Society, vol. 110(462), pages C123-38, March.
- James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
- Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
- E. Raphael Branch, 1993. "Short Run Income Elasticity of Demand for Residential Electricity Using Consumer Expenditure Survey Data," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 111-122.
- Philippe De Donder, 2000. "Majority voting solution concepts and redistributive taxation," Social Choice and Welfare, Springer, vol. 17(4), pages 601-627.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5228. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.