Work in progress

The political economy of carbon taxation with vertical and horizontal inequality

Abstract : This paper investigates how voting over a carbon tax is impacted by the distribution of the tax burden. I introduce both income and urban-rural inequalities in a majority voting framework. Urban and rural voters differ by the amount of carbon-intensive subsistence consumption. The analytical results show (i) the vote is more likely to be polarized around the urban-rural divide if incomes are less spread or society as a whole depends less on polluting consumption; and (ii) the majority tax rate may be larger than the pigouvian rate when the income inequality is stronger than the urban-rural inequality. I further calibrate the model using European data and explore complementary climate policies to carbon taxation and their effect on majority voting carbon taxation.

Intra-regional inequality and climate policy in integrated assessment models