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

Lesly Cassin (), Paolo Melindi-Ghidi and Fabien Prieur
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Lesly Cassin: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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: Green consumption; Environmental public expenditure; Inequality; Income distribution (search for similar items in EconPapers)
Date: 2025-12
Note: View the original document on HAL open archive server: https://hal.science/hal-05319857v1
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Published in European Journal of Political Economy, 2025, 90, pp.102746. ⟨10.1016/j.ejpoleco.2025.102746⟩

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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 consumerism (2023)
Working Paper: The impact of income inequality on public environmental expenditure with green consumerism (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05319857

DOI: 10.1016/j.ejpoleco.2025.102746

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