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Environmental Maintenance in a Dynamic Model with Heterogenous Agents

Kirill Borissov (), Thierry Bréchet and Stéphane Lambrecht ()

No 2012/02, EUSP Department of Economics Working Paper Series from European University at St. Petersburg, Department of Economics

Abstract: We assume a population of infinitely-lived households of the economy split into two groups: one with a high discount factor (the patient) and one with a low one (the impatient). The environmental quality is deteriorated by firm's polluting emissions. The governmental policy consists in proposing households to vote for a tax aimed at environmental maintenance. We study the voting equilibrium at steady states. The resulting equilibrium maintenance is the one of the median voter. We show that (i) an increase in total factor productivity may produce effects described by the Environmental Kuznets Curve, (ii) an increase in the patience of impatient households may foster environmental quality if the median voter is impatient and maintenance positive, (iii) a decrease in inequality among the patient households leads to an increase in environmental quality if the median voter is patient and maintenance is positive. We also show that, if the median income is lower than the mean, our model predict lower level of environmental quality than the representative agent model, and that increasing public debt decreases the level of environmental quality.

Keywords: intertemporal choice and growth, discounting, government environmental policy, externalities, environmental taxes; voting equilibrium (search for similar items in EconPapers)
JEL-codes: D72 D90 H23 Q58 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-02-27
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Working Paper: Environmental maintenance in a dynamic model with heterogenous agents (2012) Downloads
Working Paper: Environmental Maintenance in a Dynamic Model with Heterogenous Agents (2012) Downloads
Working Paper: Environmental Maintenance in a Dynamic Model with Heterogenous Agents (2012) Downloads
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