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Endogenous Fiscal Policies, Environmental Quality, and Status-Seeking Behavior

  • Phu Nguyen-Van

    (THEMA-CNRS, Universit� de Cergy-Pontoise, France)

  • Thi Kim Cuong Pham

    ()

    (BETA, Universit� de Strasbourg)

This paper analyzes endogenous ï¬scal policy and public decision in an endogenous growth model where agents care about social status and environmental quality. The quest for a higher status is assimilated to a preference for capital wealth. The government uses income tax to ï¬nance infrastructure and environmental protection, and maximizes individual welfare. We ï¬nd that accounting for preferences for social status and environmental quality may lead to an allocation of tax revenue in favor of cleanup effort to the detriment of infrastructure. It does not necessary have a negative impact on growth. Status seeking can however harm economic growth and environmental quality when its motive is important enough. Finally, we show that economic growth is consistent with environmental preservation but is not necessarily welfare-improving as in the case of absence of status-seeking behavior.

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Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 29.

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Length: 20 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:dpc:wpaper:2908
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