Democracy, inequality and the environment when citizens can mitigate privately or act collectively

We study the political economy of the environment in autocratic, weak and strong democracies when individuals can either mitigate the health consequences of domestic pollution privately or reduce pollution collectively through public policy. The setting is that of a small open economy in which incomes depend importantly on trade in dirty goods, where income inequality and the degree to which ordinary citizens exert voice in each dimension of the policy process distinguishes elites and ordinary citizens. The recognition that the health consequences of pollution can be dealt with privately at a cost adds an important dimension to the analysis of the political economy of environmental regulation, especially for an open economy. When private mitigation is feasible, inequality of incomes leads to an unequal distribution of the health burden of pollution (in accordance with the epidemiologic evidence), thus polarizing the interests of citizens in democracies and of ordinary citizens and elites in non-democratic regimes. Inequality in the willingness to bear the cost of private mitigation in turn interacts with the pollution costs and income benefits of trade in dirty goods to further polarize interests concerning both environmental stringency and the regulation of trade openness. In this context, we show how the eco-friendliness ranking of different political regimes varies with the cost of private mitigation and with the extent of income inequality, tending to converge when mitigation costs are high, and even producing a ranking reversal between democracies and autocracies, and between weak and strong democracies, when costs lie in an intermediate range.pollution, environmental regulation, private mitigation, income inequality, democracy, trade, welfare, collective choice, political economy

Natural-Resource Exploitation with Costly Enforcement of Property Rights

This paper proposes a model of natural-resource exploitation when private ownership requires costly enforcement activities. For a given wage rate, it is shown how enforcement costs can increase with labor's average productivity on a resource site. As a result, it is never optimal for the site owner to produce at the point where marginal productivity equals the wage rate. It may even be optimal to exploit at a point exhibiting negative marginal returns. An important parameter in the analysis is the prevailing wage rate. When wages are low, further decreases in the wage rates can reduce the returns from resource exploitation. At sufficiently low wages, positive returns can be rendered impossible to achieve and the site is abandoned to a free-access exploitation. The analysis provides some clues as to why property rights may be more difficult to delineate in less developed countries. It proposes a different framework from which to address normative issues such as the desirability of free trade with endogenous enforcement costs, the optimality of private decisions to enforce property rights, the effect of income distribution on property rights enforceability, etc.Cette étude propose un modèle d'exploitation des ressources naturelles lorsque les droits de propriété sont onéreux à faire respecter. Il y est démontré comment, sur un site de ressources naturelles, une hausse du produit moyen de la main-d'oeuvre peut contribuer à faire augmenter les coûts d'exclusion d'empiéteurs potentiels; il ne serait donc pas optimal, pour le propriétaire du site, d'exploiter à un niveau tel que le produit marginal de la main-d'oeuvre soit égal à son coût. Il serait même admissible que le propriétaire engage de la main-d'oeuvre dont le produit marginal soit négatif. Le niveau de salaire constitue un paramètre important de l'analyse. On trouve que lorsque le niveau de salaire de l'économie est déjà peu élevé, des réductions de salaire subséquentes peuvent contribuer à réduire les rentes découlant de l'exploitation du site. Et en deçà d'un certain seuil, des rentes positives deviennent inatteignables, forçant son propriétaire à abandonner le site; ce dernier devient alors soumis à un accès libre. L'analyse expliquerait le fait que les droits de propriété soient plus difficiles à faire observer dans les pays en voie de développement. De plus, elle suggère un cadre d'analyse à partir duquel certaines questions d'ordre normatif pourraient être abordées, telles que les bienfaits du commerce international avec coûts endogènes des droits de propriété, l'optimalité des décisions de définir les droits de propriété, l'effet de la distribution des revenus sur les coûts d'application des droits de propriété, etc

The Demands for Environmental Regulation and for Trade in the Presence of Private Mitigation

We study the nature of individual demands for environmental regulation and for trade openness in the general equilibrium of a small open economy where the environment is an input to production. Differences in the ability of individuals to afford private mitigation of the adverse consequences of pollution is a central feature of the analysis. Private mitigation leads to an endogenous, unequal distribution of the health-related consequences of pollution across income groups in a manner consistent with epidemiologic studies, in contrast to much of the literature which assumes equal health effects for all. We show that when private mitigation is possible at a cost, trade polarizes the interests of rich and poor with respect to the stringency of regulation. Moreover, even though trade has the potential to benefit everyone, the poor may oppose trade openness because of a concern that laxer environmental regulation will then be imposed in the interest of the rich. We explain why and how heterogeneity in the intensity of preferences, and not just in their direction, is likely to play a role in the determination of collective choices with respect to the regulation of the environment and of trade. We conclude by drawing out the general implications of the analysis for the study of the political economy of the environmenttrade- welfare nexus.regulation, environment, pollution, private mitigation, trade, welfare, collective choice

The Demands for Environmental Regulation and for Trade in the Presence of Private Mitigation

We study the nature of individual demands for environmental regulation and for trade openness in the general equilibrium of a small open economy where the environment is an input to production. Differences in the ability of individuals to afford private mitigation of the adverse consequences of pollution is a central feature of the analysis. Private mitigation leads to an endogenous, unequal distribution of the health-related consequences of pollution across income groups in a manner consistent with epidemiologic studies, in contrast to much of the literature which assumes equal health effects for all. We show that when private mitigation is possible at a cost, trade polarizes the interests of rich and poor with respect to the stringency of regulation. Moreover, even though trade has the potential to benefit everyone, the poor may oppose trade openness because of a concern that laxer environmental regulation will then be imposed in the interest of the rich. We explain why heterogeneity in the intensity of preferences, and not just in their direction, is likely to play a role in the determination of collective choices with respect to the regulation of the environment and of trade. We conclude by drawing out the implications of the analysis for the study of the political economy of the environment-trade-welfare nexus.regulation, environment, pollution, private mitigation, trade, welfare, health, collective choice

On the Dual Nature of Weak Property Rights

In the natural resource literature, convertional wisdom holds that weak property rights will cause a resource to be over-exploited. This is because weak property rights are typically perceived as a problem of input exclusion. In this paper, we first present evidence to the effect that weak property rights often take the form of contestable output- or output theft - and that this has an impact or resource use. We then propose a theoretical model of natural resource use under generally weak prperty rights - or weak state presence - when resource users face the dual problem of input exclusion output appropriation. We show that introducing the possibility that outputs can be contested acts as an output tax, with the added twist that resource users effectively determine the level of the tax. This tax has a depressive effect on input use. As a result, whether the resource is under-or over-exploited in equilibrium will depend on the relative severity of output appropriation and input exclusion problems when property rights are generally weak.Natural Resources, Property Rights, Trespass, Theft, Over-Exploitation,Under-Exploitation

Democracy, Inequality and the Environment when Citizens can Mitigate Privately or Act Collectively

We study the political economy of the environment in autocratic, weak and strong democracies when individuals can either mitigate the health consequences of domestic pollution privately or reduce pollution collectively through public policy. The setting is that of a small open economy in which incomes depend importantly on trade in dirty goods, where income inequality and the degree to which ordinary citizens exert voice in each dimension of the policy process distinguishes elites and ordinary citizens. The recognition that the health consequences of pollution can be dealt with privately at a cost adds an important dimension to the analysis of the political economy of environmental regulation, especially for an open economy. When private mitigation is feasible, inequality of incomes leads to an unequal distribution of the health burden of pollution (in accordance with the epidemiologic evidence), thus polarizing the interests of citizens in democracies and of ordinary citizens and elites in non-democratic regimes. Inequality in the willingness to bear the cost of private mitigation in turn interacts with the pollution costs and income benefits of trade in dirty goods to further polarize interests concerning both environmental stringency and the regulation of trade openness. In this context, we show how the eco-friendliness ranking of different political regimes varies with the cost of private mitigation and with the extent of income inequality, tending to converge when mitigation costs are high, and even producing a ranking reversal between democracies and autocracies, and between weak and strong democracies, when costs lie in an intermediate range.pollution, environmental regulation, private mitigation, income inequality, democracy, trade, welfare, collective choice, political economy

Political Influence, Economic Interests and Endogenous Tax Structure in a Computable Equilibrium Framework: with Applicatioon to the United States, 1973 and 1983

A full understanding of public affairs requires the ability to distinguish between the policies that voters would like the government to adopt, and the influence that different voters or group of voters actually exert in the democratic process. We consider the properties of a computable equilibrium model of a competitive political economy in which the economic interests of groups of voters and their effective influence on equilibrium policy outcomes can be explicitly distinguished and computed. The model incorporates an amended version of the GEMTAP tax model, and is calibrated to data for the United States for 1973 and 1983. Emphasis is placed on how the aggregation of GEMTAP households into groups within which economic and political behaviour is assumed homogeneous affects the numerical representation of interests and influence for representative members of each group. Experiments with the model suggest that the changes in both interests and influence are important parts of the story behind the evolution of U.S. tax policy in the decade after 1973.Si l’on aspire à une meilleure compréhension des choix publics, il est impératif de pouvoir faire la distinction entre les préférences de chaque électeur et l’influence qu’exerce chacun de ces électeurs, ou groupe d’électeurs, au sein du processus démocratique. Cette étude se penche sur certaines propriétés d’un modèle calculable d’équilibre général pour une économie avec concurrence politique. La modélisation proposée de cette économie permet d’isoler, à l’équilibre, le rôle joué par les intérêts économiques des différents groupes d’électeurs de celui joué par l’influence réelle qu’exerce chacun de ces groupes. Le modèle fait appel à une version modifiée du modèle GEMTAP de taxation, calibré afin de correspondre aux données de l’économie des États-Unis en 1973 et 1983. L’attention porte particulièrement sur l’importance du critère d’agrégation des différents ménages présents dans le modèle GEMTAP. De chaque critère d’agrégation, il résulte différents groupes de ménages à l’intérieur desquels les intérêts économiques et politiques sont supposés homogènes. Le modèle permet alors de déterminer comment chaque critère affecte la représentation numérique des intérêts et de l’influence associés au membre représentatif de chaque groupe. Après avoir soumis le modèle à différents essais, il est permis de croire que les changements à la fois dans les intérêts et dans l’influence doivent être pris en compte séparément afin d’expliquer l’évolution de la politique de taxation aux États-Unis entre 1973 et 1983

Les investissements en technologies flexibles de production: problèmes d'évaluation et considérations stratégiques

Rapport de rechercheNuméro de référence interne originel : a1.1 g 66