DP6774 Secondary Issues and Party Politics: An Application to Environmental Policy

Author(s): Vincent Anesi , Philippe De Donder

Publication Date: April 2008

Keyword(s): electoral competition , income polarization , party formation , salience , stable green party

JEL(s): D72 , H23

Programme Areas: Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP6774.asp.asp

The paper develops a political economy model to assess the interplay between political party formation and an environmental policy dimension viewed as secondary to the redistributive dimension. We define being a secondary issue in terms of the intensity of preferences over this issue rather than in terms of the proportion of voters who care for the environment. We build on Levy (2004) for the political equilibrium concept, defined as the solution to a two stage game where politicians first form parties and where parties then compete by choosing a policy bundle in order to win the elections. We obtain the following results: i) The Pigouvian tax never emerges in an equilibrium; ii) The equilibrium environmental tax is larger when there is a minority of green voters; iii) Stable green parties exist only if there is a minority of green voters and income polarization is large enough relative to the saliency of the environmental issue. We also study the redistributive policies advocated by green parties.