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

Author Info

Listed author(s):
  • Phu Nguyen-Van

    (THEMA-CNRS, Université de Cergy-Pontoise, France)

  • Thi Kim Cuong Pham

    ()

    (BETA, Université de Strasbourg)

Abstract

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
Handle: RePEc:dpc:wpaper:2908
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Keywords: Endogenous policy; endogenous growth; environmental quality; status-seeking; public expenditure; Wagner’s law;

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Find related papers by JEL classification:
  • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
  • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
  • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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Cited by:

  1. Zhou, Sophie Lian, 2015. "Going Green for Esteem: An Extended Uzawa-Lucas Model with Status Driven Environmentalism," Discussion Papers 206560, University of Bonn, Institute for Food and Resource Economics.
  2. Barañano Mentxaka, Ilaski & San Martín Lizarralde, Marta, 2014. "Foreign Aid Linked to Infrastructure and/or Pollution Abatement," IKERLANAK Ikerlanak;2014-78, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
  3. Chaudhry, Azam & Tanveer, Hafsa & Naz, R., 2017. "Unique and multiple equilibria in a macroeconomic model with environmental quality: An analysis of local stability," Economic Modelling, Elsevier, vol. 63(C), pages 206-214.

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