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Environmental Maintenance in a Dynamic Model with Heterogenous Agents

Abstract : We assume a population of in nitely-lived households of the economy split into two groups : one with a high discount factor (the patient) and one with a low one (the impatient). The environmental quality is deteriorated by rm's polluting emissions. The governmen tal policy consists in proposing households to vote for a tax aimed at environmental maintenance. We study the voting equilibrium at steady states. The resulting equilibrium aintenance is the one of the median voter. We show that (i) an increase in total factor productivity may produce e ects described by the Environmental Kuznets Curve, (ii) an increase in the patience of impatient households may foster en- vironmental quality if the median voter is impatient and maintenance positive, (iii) a decrease in inequality among the patient households leads to an increase in environmental quality if the median voter is patient and maintenance is positive. We also show that, if the median income is lower than the mean, our model predict lower level of environmental quality than the representative agent model, and that increasing public debt decreases the level of environmental quality.
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Kirill Borissov, Thierry Bréchet, Stéphane Lambrecht. Environmental Maintenance in a Dynamic Model with Heterogenous Agents. 2012. ⟨hal-00989799⟩

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