DP3677 On Income Inequality and Green Preferences

Author(s): Laura Marsiliani, Thomas I Renström
Publication Date: January 2003
Keyword(s): environmental policy, inequality, political economy, redistribution
JEL(s): D63, D72, H21, H23
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3677

We derive conditions of individual preferences and technology that give rise to a negative correlation between income inequality and environmental protection. We present a class of models (which captures a static model as well as an overlapping-generations model) in which individuals differ in earning abilities, and where a representative takes the decisions on a pollution tax and a redistributive tax. We show that, if private consumption goods and the environment are non-inferior goods, and the decisive individual has lower ability than the average, they will prefer a higher redistributive tax and a lower pollution tax.