Corruption and environmental policy: An alternative perspective

Athanasios Lapatinas, Anastasia Litina (anastasia.litina@uom.edu.gr) and Eftichios Sartzetakis (esartz@uom.edu.gr)

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: We construct an overlapping generations model comprising of two distinct groups of agents, citizens and politicians. Each agent lives through two periods; childhood and adulthood. She makes choices only as an adult, based on her utility that depends on her own con- sumption and the human capital and environmental quality endowed to her o¤spring. Citizens decide upon the proportion of their income that declare to the tax authorities, balancing between their own con- sumption and their o¤springs?s well being. Politicians on the other hand can peculate a part of the tax revenue allocated to education and environmental protection with the rates of peculation for each ac- tivity exogenously given. Politicians decide upon the allocation of the tax revenue between the two activities balancing a similar trade-o¤ to that of citizens. In this context, two self-ful?lling stable equilib- ria can emerge, one with high tax evasion and high allocation to the more rent-seeking activity and one with low tax evasion and low al- location to the more rent-seeking activity. This outcome accords well with existing empirical evidence and outlines that environmental poli- cies may fail in corrupt countries if they are meant to increase rent seeking instead of protecting the environment.

Date: 2011-06, Revised 2011-06
New Economics Papers: this item is included in nep-dge, nep-env and nep-pol
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Related works:
Working Paper: Corruption and Environmental Policy: An Alternative Perspective (2011)
Working Paper: Corruption and Environmental Policy: An Alternative Perspective (2011)
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