Paolo Melindi-Ghidi (AMSE)

Paolo Melindi-Ghidi
AMSE

Résumé

This article analyzes the impact of income inequality on environmental policy in the presence of green consumers. We first perform an empirical analysis using a panel of European countries over the period 1995-2021. Results show a negative relationship between inequality and environmental protection spending, which is weaker the higher the inequality. We also find a negative correlation between public expenditure and green consumption, that highlights the substitutable nature of the relationship between the two variables. 
We next develop a theory with two main ingredients: citizens with different income capacities have access to two commodities that differ in terms of environmental impact, and they vote on the environmental policy. Unique equilibrium exists in which the population is split into two groups, conventional vs green consumers. An increase in inequality raises the marginal cost of environmental policy through size and composition effects. The higher the equilibrium tax, the larger the overall effect. Connecting this result to the characteristics of the income distribution, we obtain a clear-cut explanation of our main empirical finding.