Are the Laffer curve and the green paradox mutually exclusive ?

Stefano Bosi () and David Desmarchelier
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Stefano Bosi: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne

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Abstract: In this paper, we study the relationship between the Laffer curve and the green paradox in the context of a Ramsey model with endogenous labor supply in which pollution increases consumer demand (through a compensation effect). We find that—in the long run—the conditions under which a Laffer curve and a green paradox emerge are mutually exclusive. Indeed, the Laffer curve exists under a weak compensation effect, while the green paradox requires a strong effect. Also, we find that, in the short run, limit cycles may arise in the presence of a Laffer curve, while they never occur under a green paradox.

Keywords: Ramsey model; Pollution; Laffer Curve; Green Paradox; Hopf bifurcation (search for similar items in EconPapers)
Date: 2017-10
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Citations: View citations in EconPapers (8)

Published in Journal of Public Economic Theory, 2017, 19 (5), pp.937 - 956. ⟨10.1111/jpet.12242⟩

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Related works:
Journal Article: Are the Laffer curve and the green paradox mutually exclusive? (2017)
Working Paper: Are the Laffer curve and the Green Paradox mutually exclusive? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01745432

DOI: 10.1111/jpet.12242

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