Pollution effects on preferences: A unified approach

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• Article - Journal of Public Economic Theory

Résumé

Dans cet article, nous développons un modèle à la Ramsey unifié dans lequel la pollution a un impact sur les préférences et affecte à la fois la consommation et l’offre de travail. La pollution provient des activités de production et est considérée comme une variable de stock à forte inertie. Un gouvernement prélève une taxe proportionnelle sur la production pour financer les dépenses de dépollution. Nous trouvons deux résultats intéressants lorsque la pollution augmente la demande de consommation (effet de compensation). Premièrement, à long terme, un taux d’écotaxe plus élevé augmente le niveau de pollution à l’état stable (paradoxe vert) lorsque la pollution augmente l’offre de travail (effet de désenchantement). Deuxièmement, à court terme, une indétermination locale peut survenir par le biais d’une bifurcation de Hopf lorsque la pollution diminue l’offre de travail (effet de loisir) même si la pollution a une forte inertie.

Abstract

In this paper, we introduce a unified Ramsey model where pollution has an impact on preferences and affects both consumption demand and labor supply. Pollution comes from production activities and is viewed as a stock variable with a strong inertia. A government is introduced and levies a proportional tax on production to finance depollution expenditure. We find two interesting results when pollution raises the consumption demand (compensation effect). First, in the long run, a higher green‐tax rate increases the pollution level at the steady state (green paradox) when pollution raises the labor supply (disenchantment effect). Second, in the short run, local indeterminacy can arise through a Hopf bifurcation when pollution lowers the labor supply (leisure effect) even if pollution has a strong inertia.

Citation

Bosi, Stefano, Desmarchelier, David and Ragot, Lionel, (2019), Pollution effects on preferences: A unified approach, Journal of Public Economic Theory, 21, issue 3, p. 371-399, https://EconPapers.repec.org/RePEc:bla:jpbect:v:21:y:2019:i:3:p:371-399.

@ARTICLE{RePEc:bla:jpbect:v:21:y:2019:i:3:p:371-399,
title = {Pollution effects on preferences: A unified approach},
author = {Bosi, Stefano and Desmarchelier, David and Ragot, Lionel},
year = {2019},
journal = {Journal of Public Economic Theory},
volume = {21},
number = {3},
pages = {371-399},
abstract = {In this paper, we introduce a unified Ramsey model where pollution has an impact on preferences and affects both consumption demand and labor supply. Pollution comes from production activities and is viewed as a stock variable with a strong inertia. A government is introduced and levies a proportional tax on production to finance depollution expenditure. We find two interesting results when pollution raises the consumption demand (compensation effect). First, in the long run, a higher green‐tax rate increases the pollution level at the steady state (green paradox) when pollution raises the labor supply (disenchantment effect). Second, in the short run, local indeterminacy can arise through a Hopf bifurcation when pollution lowers the labor supply (leisure effect) even if pollution has a strong inertia.},
url = {https://EconPapers.repec.org/RePEc:bla:jpbect:v:21:y:2019:i:3:p:371-399}
}