Dynamic political economy analysis of environmental and social security policies

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The purpose of this study is to analyze the politics of environmental and social security policies in the presence of intra-generational and inter-generational conflicts of interests. The analysis leads to the following results. First, there are multiple political equilibria. Which equilibrium arises depends on the expectations of agents. Second, low-income agents prefer a low, rather than a high tax burden when they have hope of upward mobility in the future. Third, the intergenerational conflict over environmental and social security policies results in an inefficient allocation in terms of environmental quality and old-age social security.