Title : Political cycles around roundabouts
Author(s) : Stefano BOSI, David DESMARCHELIER
Abstract : We develop a unified framework at the crossroads of economics, political and environmental science, and, to some extent, epidemiology. Populism is equated with climate skepticism and seen as an opinion that spreads through the population. Drawing on compartmental models in epidemiology, the population is divided into two groups that interact with each other: climate skeptics, almost always populists, and environmentalists. The political building block is integrated into a Ramsey model with a pollution externality originated from production. We introduce a Pigouvian tax to finance depollution according to a balanced-budget rule. To take account of populist pressure against environmental policies, we assume also that the tax rate decreases in the share of skeptics in population. Our unified approach reveals an interesting result: populism generates stable limit cycles through a Hopf bifurcation around the steady state, whatever the pollution effect on the consumption demand. Importantly, without populism, it was not the case under a negative distaste effect. Thus, populism exacerbates pollution-induced volatility: populist parties focusing on economic issues should manage excess volatility without rejecting environmental policies out of hand.
Key-words : ecotax, populism, political cycles.
JEL Classification : C62, H23, O44.
