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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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  • Valente, Simone, 2011. "Intergenerational externalities, sustainability and welfare—The ambiguous effect of optimal policies on resource depletion," Resource and Energy Economics, Elsevier, vol. 33(4), pages 995-1014.
    • Handle: RePEc:eee:resene:v:33:y:2011:i:4:p:995-1014
    DOI: 10.1016/j.reseneeco.2010.09.001
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    More about this item

    Keywords

    Endogenous growth; Exhaustible resources; Human capital; Overlapping generations; Intergenerational distribution; Sustainability;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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