Private Externalities and Environmental Public Goods: Politico-economic Consequences

Timothy Kam and Yingying Lu ()

ANU Working Papers in Economics and Econometrics from Australian National University, College of Business and Economics, School of Economics

Abstract: We study an overlapping-generations model with private externalities on a public good (e.g. the environment). Emergent politico-economic equilibria, depending on model primitives (e.g. the degree of externality), imply that average income and environmental outcomes may be related positively or negatively, or not at all. Qualitatively, these equilibria provide a cross-country interpretation for existing disagreements in empirical findings on average income and environment. Normatively, inefficiently excessive environmental outcomes may emerge. These are partly explained by a politico-economic redistributive tension along a taxation Laffer curve. However, with externalities, this tension is further modified, resulting in these excesses being non-monotonic in the degree of externality.

JEL-codes: D72 D78 E62 H21 H23 (search for similar items in EconPapers)
Pages: 38 Pages
Date: 2012-10
New Economics Papers: this item is included in nep-dge and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:acb:cbeeco:2012-589

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