The impact of income inequality on public environmental expenditure with green consumers

Lesly Cassin (), Paolo Melindi-Ghidi and Fabien Prieur
Additional contact information
Lesly Cassin: BETA Université de Lorraine
Fabien Prieur: CEE-M Université de Montpellier

No 2025.10, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: This article analyzes the impact of income inequality on environmental policy in the presence of green consumers. We first perform an empirical analysis using a panel of European countries over the period 1995-2021. The results show a negative relationship between inequality and public environmental expenditure, which is weaker with higher inequality. We also find a negative correlation between environmental expenditure and green consumption, that highlights the substitutable nature of the relationship between the two variables. We next develop a model with two main ingredients: citizens with different income capacities have access to two commodities that differ in terms of environmental impact, and they vote on the environmental policy. In equilibrium, the population is divided into two groups, conventional vs green consumers. An increase in inequality raises the marginal cost of policy through size and composition effects. The higher the equilibrium tax, the larger the overall effect. This provides us with an explanation of the main empirical result.

Keywords: income distribution; inequality; green consumption; environmental public expenditure (search for similar items in EconPapers)
JEL-codes: D31 D72 H23 Q58 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2025-11
References: Add references at CitEc
Citations:

Forthcoming in Oui: Titre de la revue European Journal of Political Economy

Downloads: (external link)
https://faere.fr/pub/WorkingPapers/CASSIN_MELINDI- ... _FAERE_WP2025.10.pdf First version, 2023 (application/pdf)

Related works:
Journal Article: The impact of income inequality on public environmental expenditure with green consumers (2025)
Working Paper: The impact of income inequality on public environmental expenditure with green consumers (2025)
Working Paper: The impact of income inequality on public environmental expenditure with green consumerism (2023)
Working Paper: The impact of income inequality on public environmental expenditure with green consumerism (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2025.010

Access Statistics for this paper

More papers in Working Papers from FAERE - French Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Dorothée Charlier ().