Abstract
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 inter-generational 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 (i) the political economy is generally inefficient in terms of environmental quality and welfare, and (ii) the introduction of environmental lobbying into politics may improve environmental quality but definitely degrades welfare in the long run.
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