Working Paper: CEPR ID: DP6774
Authors: Vincent Anesi; Philippe de Donder
Abstract: The paper develops a political economy model to assess the interplay between political party formation and an environmental policy dimension viewed as secondary to the redistributive dimension. We define being a secondary issue in terms of the intensity of preferences over this issue rather than in terms of the proportion of voters who care for the environment. We build on Levy (2004) for the political equilibrium concept, defined as the solution to a two stage game where politicians first form parties and where parties then compete by choosing a policy bundle in order to win the elections.We obtain the following results: i) The Pigouvian tax never emerges in an equilibrium; ii) The equilibrium environmental tax is larger when there is a minority of green voters; iii) Stable green parties exist only if there is a minority of green voters and income polarization is large enough relative to the saliency of the environmental issue. We also study the redistributive policies advocated by green parties.
Keywords: Electoral Competition; Income Polarization; Party Formation; Salience; Stable Green Party
JEL Codes: D72; H23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minority of green voters, sufficient income polarization (D72) | emergence of stable green party (Q01) |
| minority of green voters (D79) | equilibrium environmental tax (H23) |
| political dynamics (D72) | Pigouvian tax never emerges in equilibrium (D62) |
| minority of green voters, significant income polarization (D72) | stable green parties exist (P28) |