Socially responsible investment in an environmental overlapping generations model
AbstractOne of the problems associated with the conservation of the environment is that short-lived individuals fail to account for the long-term effects of pollution, which implies that future generations bear the costs imposed by the current generation. Such inter-generational externalities are usually tackled by (Pigovian) taxes, fiscal policy or environmental regulation. Alternatively, we propose that socially responsible investment funds create a role for the stock market to deal with intergenerational environmental externalities. We analyze the role of the stock market in an environmental overlapping generations model of the Diamond-type, in which agents choose between investing in “clean” government bonds or “polluting” firm equity. We show that although socially responsible investors are short-lived, the forward-looking nature of stock prices can help to resolve the conflict between current and future generations.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 33 (2011)
Issue (Month): 4 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505569
Overlapping generations; Environmental quality; Socially responsible investment; Corporate social responsibility; Sustainability; Stock market;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Junxi Zhang, 1999. "Environmental sustainability, nonlinear dynamics and chaos," Economic Theory, Springer, vol. 14(2), pages 489-500.
- John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
- Bansal, Sangeeta & Gangopadhyay, Shubhashis, 2003. "Tax/subsidy policies in the presence of environmentally aware consumers," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 333-355, March.
- Chilton, Susan M. & Hutchinson, W. George, 1999. "Some Further Implications of Incorporating the Warm Glow of Giving into Welfare Measures: A Comment on the Use of Donation Mechanisms by Champet al," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 202-209, March.
- CREMER, Helmuth & THISSE, Jacques-François, .
"On the taxation of polluting products in a differentiated industry,"
CORE Discussion Papers RP
-1384, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Thisse, Jacques-Francois, 1999. "On the taxation of polluting products in a differentiated industry," European Economic Review, Elsevier, vol. 43(3), pages 575-594, March.
- Hong, Harrison & Kacperczyk, Marcin, 2009. "The price of sin: The effects of social norms on markets," Journal of Financial Economics, Elsevier, vol. 93(1), pages 15-36, July.
- Lammertjan Dam & Ben J. Heijdra, 2008.
"The Environmental and Macroeconomic Effects of Socially Responsible Investment,"
CESifo Working Paper Series
2349, CESifo Group Munich.
- Dam, Lammertjan & Heijdra, Ben J., 2011. "The environmental and macroeconomic effects of socially responsible investment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1424-1434, September.
- Nyborg, Karine & Howarth, Richard B. & Brekke, Kjell Arne, 2006.
"Green consumers and public policy: On socially contingent moral motivation,"
Resource and Energy Economics,
Elsevier, vol. 28(4), pages 351-366, November.
- Nyborg, Karine & Howarth, Richard B. & Brekke, Kjell Arne, 2003. "Green consumers and public policy: On socially contingent moral motivation," Memorandum 31/2003, Oslo University, Department of Economics.
- Merton, Robert C., 1987.
"A simple model of capital market equilibrium with incomplete information,"
1869-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
- John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, vol. 58(1), pages 127-141, September.
- Baron, David P., 2008. "Managerial contracting and corporate social responsibility," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 268-288, February.
- Thomas Seegmuller & Alban Verchere, 2002.
"Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies,"
Working Papers of BETA
2002-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
- Seegmuller, Thomas & Verchere, Alban, 2004. "Pollution as a source of endogenous fluctuations and periodic welfare inequality in OLG economies," Economics Letters, Elsevier, vol. 84(3), pages 363-369, September.
- Guruswamy Babu, P. & Kavi Kumar, K. S. & Murthy, N. S., 1997. "An overlapping generations model with exhaustible resources and stock pollution," Ecological Economics, Elsevier, vol. 21(1), pages 35-43, April.
- Andrea Beltratti, 2005. "The Complementarity between Corporate Governance and Corporate Social Responsibility," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 30(3), pages 373-386, July.
- Heinkel, Robert & Kraus, Alan & Zechner, Josef, 2001. "The Effect of Green Investment on Corporate Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 431-449, December.
- Bovenberg, A. Lans & Heijdra, Ben J., 1998. "Environmental tax policy and intergenerational distribution," Journal of Public Economics, Elsevier, vol. 67(1), pages 1-24, January.
- Fama, Eugene F. & French, Kenneth R., 2007. "Disagreement, tastes, and asset prices," Journal of Financial Economics, Elsevier, vol. 83(3), pages 667-689, March.
- Ferreira-Lopes, Alexandra & Roseta-Palma, Catarina & Sequeira, Tiago Neves, 2012. "When sociable workers pay off: Can firms internalize social capital externalities?," Structural Change and Economic Dynamics, Elsevier, vol. 23(2), pages 127-136.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.