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Environmentally aware households

Manthos Delis () and Maria Iosifidi

Economic Modelling, 2020, vol. 88, issue C, 263-279

Abstract: The rising environmental awareness induces a changing landscape for policymakers and real economic prospects. We examine the properties of a general equilibrium model with endogenous household preferences (for labor, consumption, and environmental quality) and a negative environmental externality. The endogeneity of labor creates an additional channel of substitution between environmental quality and labor, besides the channel of substitution between environmental quality and consumption. We show that a key requirement for improved output following a positive shock in the weight of environmental quality (household environmental awareness) is that environmental awareness trades off the weight on labor and not the weight on consumption. An interesting feature of the model is that the existence of the environmental externality gives a non-zero capital tax in the long run.

Keywords: Environmental awareness; Environmental quality; Labor; Consumption; Real outcomes (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econmod.2019.09.038

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