Carbon Tax with Individuals’ Heterogeneous Environmental Concerns

Spinesi Luca ()
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Spinesi Luca: Department of Economics, University of Rome Tre, Via Silvio d’Amico 77, 00145, Roma, Italy

The B.E. Journal of Economic Analysis & Policy, 2025, vol. 25, issue 3, 681-730

Abstract: This study analyzes the effects of carbon taxation and environmental awareness on wage inequality and economic growth. The findings reveal that a stricter carbon tax positively correlates with wage inequality and growth. When R&D firms lack complete control over the magnitude of innovation leaps, a tighter carbon tax exacerbates wage inequality while fostering income growth and green innovation. When firms fully determine their innovation leap, a stricter carbon tax reduces wage inequality and slows GDP growth. Changes in the population’s environmental awareness generate different results. When R&D firms lack complete control over innovation leaps, greater ecological awareness increases wage inequality and GDP growth, but only if green products command a higher markup. When firms fully determine innovation leaps, rising ecological awareness induces a U-shaped effect on the skill premium and an inverted U-shaped effect on the share of unskilled workers, while consistently supporting per capita GDP growth.

Keywords: environmental concerns; endogenous technological change; pollution abatement; wage inequality; growth (search for similar items in EconPapers)
JEL-codes: I24 O30 O44 Q58 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1515/bejeap-2025-0022

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