Environmentally aware households |
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Affiliation: | 1. Warsaw School of Economics, International Comparative Studies Department, Warsaw, Poland;2. Centre for Social and Economic Research, Warsaw, Poland;1. INSEEC Business School, France;2. University of Lille, Office B655, 104 Avenue du Peuple Belge, Lille, 59004, France;3. IPAG Business School, IPAG LAB, France;4. EDC Paris Business School, France |
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Abstract: | The rising environmental awareness induces a changing landscape for policymakers and real economic prospects. We examine the properties of a general equilibrium model with endogenous household preferences (for labor, consumption, and environmental quality) and a negative environmental externality. The endogeneity of labor creates an additional channel of substitution between environmental quality and labor, besides the channel of substitution between environmental quality and consumption. We show that a key requirement for improved output following a positive shock in the weight of environmental quality (household environmental awareness) is that environmental awareness trades off the weight on labor and not the weight on consumption. An interesting feature of the model is that the existence of the environmental externality gives a non-zero capital tax in the long run. |
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Keywords: | Environmental awareness Environmental quality Labor Consumption Real outcomes |
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