The political economy of environmental and social security policies: The role of environmental lobbying

Social security provides retirement benefits to the old at the expense of the working young, while environmental investment benefits the future of the young at the expense of the old. This paper presents a model incorporating this intergenerational conflict on public spending and considers the political determination of environmental investment and social security by focusing on the Markovian political equilibria. It is shown that (1) the political equilibria are generally inefficient, and (2) the introduction of environmental lobbying into politics may improve environmental quality but degrade lifetime utility in the long run. © 2009 Springer-Verlag.