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Endogenous Fiscal Policies, Environmental Quality, and Status-Seeking Behavior

Thi Kim Cuong Pham () and Phu Nguyen-Van ()

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper analyzes endogenous fiscal policy and public decision in an endogenous growth model where agents care about social status and environmental quality. The quest for a higher status is assimilated to a preference for capital wealth. The government uses income tax to finance infrastructure and environmental protection, and maximizes individual welfare. We find that accounting for preferences for social status and environmental quality may lead to an allocation of tax revenue in favor of cleanup effort to the detriment of infrastructure. It does not necessary have a negative impact on growth. Status seeking can however harm economic growth and environmental quality when its motive is important enough. Finally, we show that economic growth is consistent with environmental preservation but is not necessarily welfare-improving as in the case of absence of status-seeking behavior.

Keywords: Endogenous policy; endogenous growth; environmental quality; status-seeking; public expenditure; Wagner's law. (search for similar items in EconPapers)
JEL-codes: H31 O41 Q58 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-env
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Related works:
Journal Article: Endogenous fiscal policies, environmental quality, and status-seeking behavior (2013) Downloads
Working Paper: Endogenous Fiscal Policies, Environmental Quality, and Status-Seeking Behavior (2008) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2009-22

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