Environmental Pollution & the Political Economy of Public Debt

Maximilian Kellner

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper analyzes the political economy of government debt when elected politicians decide about the distribution of public funds between a clean and a polluting public good. When provision of the polluting good creates a stock of climate externalities, strategic incentives for the incumbent government arise from both a budget and emission interaction. In this framework, reelection uncertainty leads to inefficiently low public savings (or even debt) which are attenuated by the emission interaction, while first period pollution decreases regardless of the future government's identity. If the incumbent government competes for office against an environmentalists' party, the total welfare loss from emissions also decreases as a direct result of reelection uncertainty.

Keywords: emission externality; public debt; political economy (search for similar items in EconPapers)
JEL-codes: H23 H41 H63 Q54 Q58 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ene, nep-env and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224561

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