Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223529
Authors: 
Ambec, Stefan
De Donder, Philippe
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8457
Abstract: 
Is green consumerism beneficial to the environment and the economy? To shed light on this question, we study the political economy of environmental regulations in a model with neutral and green consumers where the latter derive some warm glow from buying a good of higher environmental quality produced by a profit-maximizing monopoly, while the good bought by neutral consumers is provided by a competitive fringe. Consumers unanimously vote for a standard set at a lower than first-best level, or for a tax delivering the first-best environmental protection level. Despite its under-provision of environmental protection, the standard dominates the tax from a welfare perspective due to its higher productive efficiency, i.e., a smaller gap between the environmental qualities of the two goods supplied. In stark contrast, voters unanimously prefer a tax to a standard when the willingness to pay for greener goods is small enough.
Subjects: 
environmental regulation
corporate social responsibility
green consumerism
product differentiation
tax
standard
green label
political economy
JEL: 
D24
D62
Q41
Q42
Q48
Document Type: 
Working Paper

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