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Intergenerational externalities, sustainability and welfare—The ambiguous effect of optimal policies on resource depletion

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  • Valente, Simone

Abstract

This paper studies an endogenous growth model with exhaustible resources, overlapping generations and human capital externalities. In the competitive equilibrium, selfish behavior and inefficient skills accumulation may prevent sustained growth. Implementing the utilitarian optimum likely induces sustainability via increased knowledge formation, but resource depletion may be faster or slower than under laissez-faire depending on the social discount rate. Heavy (modest) social discounting delays (anticipates) the achievement of net welfare gains for newborn agents and successors. The reason is that human capital accumulation magnifies the positive growth effects of policies that lower the rate of resource destruction, preserving the welfare of newborn agents. Resource-depleting policies, instead, hamper growth and reduce lifetime welfare of early-in-time generations—the first loser being the currently young.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 4 ()
Pages: 995-1014

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Handle: RePEc:eee:resene:v:33:y:2011:i:4:p:995-1014

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Web page: http://www.elsevier.com/locate/inca/505569

Related research

Keywords: Endogenous growth; Exhaustible resources; Human capital; Overlapping generations; Intergenerational distribution; Sustainability;

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References

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