Puzzling over sustainability: an equilibrium analysis
AbstractIn this paper we model an overlapping generations economy in which individuals are endowed with a renewable resource. This resource can be exploited at no cost by the young households and provided to production. A joy-of-giving bequest motive motivates the transfer of the unexploited resource to the heirs. The study of intertemporal equilibrium reveals three puzzles neglected by the literature on sustainability. First, the existence of a bequest motive does not automatically guaranteea sustainable future. Second, human exploitation may preserve the resource in equilibrium but at a sub-optimal rate; in this case, both those who exploit too much and those who do not exploit enough should run a capital stock lower than the golden rule level. Third, there exist fluctuating transitions to a sustainable future in which some generations are worse off than both their ascendants and their descendants.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005001.
Date of creation: 00 Jan 2005
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overlapping generations; sustainability; altruism; natural resource;
Find related papers by JEL classification:
- D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy
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