Environmental innovations heavily depend on government policies and consumers' behaviour. This paper addresses the issue of how these two factors interact in shaping the transition to a green technology. We extend models of technological selection with heterogeneous agents and learning by including a weak hierarchy between green and polluting goods. For general distributions of agents' income and the explicit inclusion of a carbon tax, the model is not analytically tractable so we derive our results using numerical simulations. Given the level of income, carbon taxes are more effective when technological improvements brought about by wealthy pioneer consumers suffice in inducing the remaining population to buy the green good. In this case, a negative relationship between income inequality and tax effectiveness emerges. Taxes on polluting production have a regressive effect since they are mainly paid by poorer people who consume less of the green good. For these people, a negative wealth effect strongly contrasts the standard substitution effect of the tax. Finally, both lower inequality and taxes have the expected effect for intermediate levels of the learning parameter.

Environmental taxes, inequality and technical change / Patriarca, Fabrizio; Vona, Francesco. - In: REVUE DE L'OFCE. - ISSN 1265-9576. - 124:5(2012), pp. 389-413. [10.3917/reof.124.0389]

Environmental taxes, inequality and technical change

Patriarca, Fabrizio
Formal Analysis
;
2012

Abstract

Environmental innovations heavily depend on government policies and consumers' behaviour. This paper addresses the issue of how these two factors interact in shaping the transition to a green technology. We extend models of technological selection with heterogeneous agents and learning by including a weak hierarchy between green and polluting goods. For general distributions of agents' income and the explicit inclusion of a carbon tax, the model is not analytically tractable so we derive our results using numerical simulations. Given the level of income, carbon taxes are more effective when technological improvements brought about by wealthy pioneer consumers suffice in inducing the remaining population to buy the green good. In this case, a negative relationship between income inequality and tax effectiveness emerges. Taxes on polluting production have a regressive effect since they are mainly paid by poorer people who consume less of the green good. For these people, a negative wealth effect strongly contrasts the standard substitution effect of the tax. Finally, both lower inequality and taxes have the expected effect for intermediate levels of the learning parameter.
124
5
389
413
Environmental taxes, inequality and technical change / Patriarca, Fabrizio; Vona, Francesco. - In: REVUE DE L'OFCE. - ISSN 1265-9576. - 124:5(2012), pp. 389-413. [10.3917/reof.124.0389]
Patriarca, Fabrizio; Vona, Francesco
File in questo prodotto:
File Dimensione Formato  
REOF.pdf

non disponibili

Descrizione: Articolo Principale
Tipologia: Versione dell'editore (versione pubblicata)
Dimensione 439.78 kB
Formato Adobe PDF
439.78 kB Adobe PDF   Visualizza/Apri   Richiedi una copia
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

Licenza Creative Commons
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11380/1177103
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 2
  • ???jsp.display-item.citation.isi??? ND
social impact