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Title: Inequality, Environmental Protection and Growth

Author(s): Laura Marsiliani and Thomas I Renström

Publication Date: February 2003

Keyword(s): environmental policy, growth, inequality, political economy and redistribution

Programme Area(s): International Macroeconomics and Public Economics

Abstract: We analyse how, in representative democracies, income distribution influences the stringency of environmental policy and economic growth. Individuals (who differ in abilities) live for two periods, working when young and owning capital when old. Externalities are caused by a polluting factor. The revenue from pollution taxation, as well as capital-income taxation, is redistributed in a lump-sum to the old. A majority-elected representative takes the fiscal decision, at each point in time. In politico-economic equilibrium, more inequality (in terms of the skewedness of the distribution) yields a lower pollution tax, a larger capital tax, and lower growth.

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Bibliographic Reference

Marsiliani, L and Renström, T. 2003. 'Inequality, Environmental Protection and Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3754