Income Inequality and the Development of Environmental Technologies

Francesco Vona and Fabrizio Patriarca ()

No 2010-22, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: Within rich countries, a large dispersion in the capacity of generating environmental innovations appears correlated to the level of inequality. Previous works analyse the relationship between inequality and environmental quality in a static setting. This paper builds a dynamic model more suitable to analyze technological externalities driven by the emergence of a new demand for green products. Under fairly general assumptions on technology and preferences, we show that: 1. the relationship between inequality and environmental innovation is highly non-linear and crucially depends on per-capita income; 2. an excessive inequality harms the development of environmental technologies especially in rich countries. Key to our results is the fact that externalities generated by pioneer consumers of green products benefit the entire population only for relatively low income distances. The empirical analysis robustly confirms our theoretical results, that is: whereas for rich countries inequality negatively affects the diffusion of innovations, per-capita income is paramount in poorer ones.

Keywords: Inequality; Demand; Environmental Innovations; Pioneer Consumer. (search for similar items in EconPapers)
JEL-codes: O14 O15 Q55 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-env
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Income inequality and the development of environmental technologies (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1022

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