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Is inequality harmful for the environment in a growing economy ?

In this paper we investigate the relationship between inequality and the environment in a growing economy from a political economy perspective. We consider an endogenous growth economy, where growth generates pollution and a deterioration of the environment. Public expenditures may either be devoted to supporting growth or abating pollution. The decision over the public programs is done in a direct democracy, with simple majority rule. We prove that the median voter is decisive and show that inequality is harmful for the environment : the poorer the median voter relative to the average individual, the less she will tax and devote resources to the environment, preferring to support growth.

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Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v06045.

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Length: 19 pages
Date of creation: Sep 2005
Date of revision: May 2006
Handle: RePEc:mse:wpsorb:v06045
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  1. Fiaschi, Davide, 1999. "Growth and inequality in an endogenous fiscal policy model with taxes on labor and capital," European Journal of Political Economy, Elsevier, vol. 15(4), pages 727-746, November.
  2. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  3. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  4. Hirtle, Beverly, 2009. "Credit derivatives and bank credit supply," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 125-150, April.
  5. Larry E. Jones & Rodolfo E. Manuelli, 2000. "Endogenous policy choice: the case of pollution and growth," Staff Report 276, Federal Reserve Bank of Minneapolis.
  6. Magnani, Elisabetta, 2000. "The Environmental Kuznets Curve, environmental protection policy and income distribution," Ecological Economics, Elsevier, vol. 32(3), pages 431-443, March.
  7. Kahn, Matthew E & Matsusaka, John G, 1997. "Demand for Environmental Goods: Evidence from Voting Patterns on California Initiatives," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 137-73, April.
  8. Alberto Alesina & Dani Rodrik, 1991. "Distributive Politics and Economic Growth," NBER Working Papers 3668, National Bureau of Economic Research, Inc.
  9. Andreoni, James & Levinson, Arik, 2001. "The simple analytics of the environmental Kuznets curve," Journal of Public Economics, Elsevier, vol. 80(2), pages 269-286, May.
  10. Torras, Mariano & Boyce, James K., 1998. "Income, inequality, and pollution: a reassessment of the environmental Kuznets Curve," Ecological Economics, Elsevier, vol. 25(2), pages 147-160, May.
  11. Aghion, Philippe & Caroli, Eve & García-Peñalosa, Cecilia, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Scholarly Articles 12502063, Harvard University Department of Economics.
  12. Marsiliani, L. & Renstrom, T.I., 2000. "Inequality, Environmental Protection and Growth," Discussion Paper 2000-34, Tilburg University, Center for Economic Research.
  13. Hubert Kempf & Stéphane Rossignol, 2005. "Growth, Inequality, and Integration: A Political Economy Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(5), pages 709-739, December.
  14. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  15. Perotti, Roberto, 1996. " Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth, Springer, vol. 1(2), pages 149-87, June.
  16. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January.
  17. Earnhart, Dietrich, 1997. "Enforcement of Environmental Protection Laws under Communism and Democracy," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 377-402, October.
  18. van Marrewijk, Charles & van der Ploeg, Federick & Verbeek, Jos, 1993. "Is growth bad for the environment? Pollution, abatement, and endogenous growth," Policy Research Working Paper Series 1151, The World Bank.
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