Endogenous political cleavages and the economics of climate change

Marwil Dávila-Fernández, Christian Proaño () and Serena Sordi

Department of Economics University of Siena from Department of Economics, University of Siena

Abstract: The ongoing transformation of the social base supporting political choices in highincome countries is happening in the context of raising demand for more significant efforts to reduce carbon emissions. Our research question lies in the intersection between these two major themes. We develop a heterogeneous agents behavioural macro model that differentiates between left- and right-wing voting preferences in two main political dimensions: economic-distributive and socio-cultural. A continuous-time version of the discrete-choice approach describes the composition of the population over time. The model is compatible with the emergence of “left-left”, “left-right”, “rightleft”, and “right-right” coalitions, each associated with a skill premium and carbon taxes or subsidies. Human capital accumulation results in a wage differential that influences production and feedback on inequality. Through induced technical change, taxing emissions influences the development of carbon-neutral production techniques, impacting output and ultimately feeding political attitudes. We numerically study the implications of secularisation and the asymmetric effects of carbon taxes on low/highskilled workers to green transition. It is shown that achieving absolute decoupling is a two-part problem. Reaching a consensus for implementing a carbon tax is only the first step. A sufficiently strong element of induced technical change favouring carbonneutral production techniques is also necessary to avoid reducing living standards

Keywords: Political cleavages; Climate change; Inequality; Human capital; Carbon tax (search for similar items in EconPapers)
JEL-codes: C62 D72 Q01 Q54 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env, nep-inv and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:usi:wpaper:909

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