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Inequality, Environmental Protection and Growth

  • Laura Marsiliani

    (W. Allen Wallis Institute of Political Economy, University of Rochester)

  • Thomas Renstrom

    (W. Allen Wallis Institute of Political Economy, University of Rochester and CEPR)

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    We analyze 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 lump-sum to the old. The fiscal decision, at each point in time, is taken by a majority elected representative. In politico-economic equilibrium, more inequality (in terms of the skewness of the distribution) yields a lower pollution tax, a larger capital tax, and lower growth.

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    File URL: http://www.wallis.rochester.edu/WallisPapers/wallis_35.pdf
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    Paper provided by University of Rochester - Wallis Institute of Political Economy in its series Wallis Working Papers with number WP35.

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    Length: pages
    Date of creation: Nov 2002
    Date of revision:
    Handle: RePEc:roc:wallis:wp35
    Contact details of provider: Postal: University of Rochester, Wallis Institute, Harkness 109B Rochester, New York 14627 U.S.A.

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    1. Larry E. Jones & Rodolfo E. Manuelli, 2000. "Endogenous policy choice: the case of pollution and growth," Staff Report 276, Federal Reserve Bank of Minneapolis.
    2. Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models," Other publications TiSEM f3ec6de7-f996-4ac0-b872-0, Tilburg University, School of Economics and Management.
    3. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
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    20. Marsiliani, L. & Renstrom, T.I., 2000. "Inequality, Environmental Protection and Growth," Discussion Paper 2000-34, Tilburg University, Center for Economic Research.
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    29. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
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