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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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    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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    27. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
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