Inequality, Environmental Protection and Growth

Renström, Thomas I and Laura Marsiliani

No 3754, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyse 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 in a lump-sum to the old. A majority-elected representative takes the fiscal decision, at each point in time. In politico-economic equilibrium, more inequality (in terms of the skewedness of the distribution) yields a lower pollution tax, a larger capital tax, and lower growth.

Keywords: Environmental policy; Redistribution; Inequality; Political economy; Growth (search for similar items in EconPapers)
JEL-codes: D62 D72 H21 H23 O41 (search for similar items in EconPapers)
Date: 2003-02
New Economics Papers: this item is included in nep-dev and nep-ene
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Citations: View citations in EconPapers (5)

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