Going green and (un)equal ? Political coalitions, redistribution, and the environment

Abstract

This paper presents a political economy model in which people express conflicting demands about equality and ecology, and coalitions emerge as political equilibria. We also examine the environmental and redistributive policies associated with such equilibria, the incentives for ecological transition, and the consequences for ex-post inequalities. For these purposes, we consider three socio-economic groups: the educated bourgeoisie (BE), the working class (CP), and the financial elite (EF). Specifically, we elaborate an original perspective on social groups’ preferences regarding environmental protection and capital-financed redistribution. Under the disjoint majority vote, this model delivers full capital protection, no redistribution, and no environmental policies. This is the best solution for the EF group. Consequently, a two-party coalition can be formed that improves the welfare of the BE and CP groups. Moreover, the coalitions’ equilibria deliver redistributive and environmental policies entailing higher incentives for the ecological transition and lower ex-post inequalities. Finally, in line with the rise of green finance, we investigate the surge of new alliances and highlight the risks of unequal ecological outcomes.