| Abstract: |
We analyse 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 benchmark 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. |