POLITICAL INSTITUTIONS, ENVIRONMENTAL POLICY, AND GROWTH

Laura Marsiliani
Thomas I. Renström

We analyze the impact of micro-founded political institutions on environmental policy and economic growth. We model an overlapping-generations economy, where individuals differ in preferences over the environment (as well as in age). Labour taxation and capital taxation is used to finance a public good and a public production factor, period by period. The underlying political institution is a parliament. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. The bench mark is when all decisions are taken in parliament. We compare this constitution with an independent regulator, elected in parliament. The regulatory regime causes lower pollution, but production inefficiency.

Keywords: Comparative politics, voting, bargaining, taxation, environmental policy, endogenous growth, overlapping generations.

JEL classification: D62, D72, E20, E62, H20, H55, O41, Q58.

Correspondence to:
L. Marsiliani, Department of Economics and Finance, University of Durham, 23-26 Old Elvet, Durham, DH1 3HY, UK.
Tel: +44-(0)191-334 6363. Fax: +44-(0)191-334 6341.
Email: [email protected] Web: http://www.dur.ac.uk/laura.marsiliani/

T.I. Renström, Department of Economics and Finance, University of Durham, 23-26 Old Elvet, Durham, DH1 3HY, UK.
Tel: +44-(0)191-334 6369. Fax: +44-(0)191-334 6341.
Email: [email protected] Web: http://www.dur.ac.uk/t.i.renstrom/

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