2011 年 41 巻 4 号 p. 897-911
The purpose of this study was to investigate how the presence of green and producer lobbies can affect the political determination of environmental policies. We considered the economies of two countries——Home and Foreign. Both countries were perfectly similar, except for the presence of environmentalists in Home who are negatively affected by pollution abroad. There existed a polluting sector where two polluting firms——one in Home and the other in Foreign——competed strategically in a third market.
We assumed that the green lobby existed only in Home and was concerned about environmental damage in Home. Moreover, the producer lobby existed only in Foreign and was concerned with industrial profit in Foreign.
Political competition can be modelled as a two-stage game. In the first stage, the green and producer lobbies simultaneously present incumbent politicians with contribution schedules, namely functions describing their political contributions contingent on the chosen environmental policies.
In the second stage, given the equilibrium contribution schedules, incumbent politicians select environmental policies and collect the corresponding contributions from each lobby. The implicit objective of the incumbent politicians is to be re-elected. They are concerned with social welfare and support from lobby groups.
We determined the impact of an increase in the size of each lobby depends on whether pollution is local or global, and the extent to which environmentalists are concerned about pollution in the other country.
JEL Classification: F12, H23, Q58