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A Dynamic Analysis of Human Welfare in a Warming Planet

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  • Humberto Llavador

    (Universitat Pompeu Fabra)

  • John E. Roemer

    ()
    (Yale University)

  • Joaquim Silvestre

    (University of California, Davis)

Abstract

Climate science indicates that climate stabilization requires low GHG emissions. Is this consistent with nondecreasing human welfare? Our welfare index, called quality of life (QuoL), emphasizes education, knowledge, and the environment. We construct and calibrate a multigenerational model with intertemporal links provided by education, physical capital, knowledge and the environment. We reject discounted utilitarianism and adopt, first, the Intergenerational Maximin criterion, and, second, Human Development Optimization, that maximizes the QuoL of the first generation subject to a given future rate of growth. We apply these criteria to our calibrated model via a novel algorithm inspired by the turnpike property. The computed paths yield levels of QuoL higher than the year 2000 level for all generations. They require the doubling of the fraction of labor resources devoted to the creation of knowledge relative to the reference level, whereas the fractions of labor allocated to consumption and leisure are similar to the reference ones. On the other hand, higher growth rates require substantial increases in the fraction of labor devoted to education, together with moderate increases in the fractions of labor devoted to knowledge and the investment in physical capital.

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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1673R.

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Length: 69 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:cwl:cwldpp:1673r

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Quality of life; Climate change; Education; Maximin; Growth;

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References

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  1. Krautkraemer, Jeffrey A, 1985. "Optimal Growth, Resource Amenities, and the Preservation of Natural Environments," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 153-70, January.
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  3. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
  4. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2010. "Intergenerational Justice When Future Worlds are Uncertain," Working Papers 473, Barcelona Graduate School of Economics.
  5. Salvador Ortigueira, 1997. "A Dynamic Analysis of an Endogenous Growth Model with Leisure," Working Papers 9705, Centro de Investigacion Economica, ITAM.
  6. John E. Roemer, 2005. "Intergenerational Justice and Sustainability under the Leximin Ethic," Cowles Foundation Discussion Papers 1512, Cowles Foundation for Research in Economics, Yale University.
  7. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
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  10. Angel de la Fuente & Rafael Domenech, 2001. "Schooling Data, Technological Diffusion, and the Neoclassical Model," American Economic Review, American Economic Association, vol. 91(2), pages 323-327, May.
  11. John Roemer, 2011. "The Ethics of Intertemporal Distribution in a Warming Planet," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(3), pages 363-390, March.
  12. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
  13. Arrow Kenneth J, 2007. "Global Climate Change: A Challenge to Policy," The Economists' Voice, De Gruyter, vol. 4(3), pages 1-5, June.
  14. Neumayer, Eric, 1999. "Global warming: discounting is not the issue, but substitutability is," Energy Policy, Elsevier, vol. 27(1), pages 33-43, January.
  15. Joaquim Silvestre, 2002. "Progress and conservation under Rawls's maximin principle," Social Choice and Welfare, Springer, vol. 19(1), pages 1-27.
  16. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  17. Nordhaus, William D, 1991. "To Slow or Not to Slow: The Economics of the Greenhouse Effect," Economic Journal, Royal Economic Society, vol. 101(407), pages 920-37, July.
  18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  19. Philip Oreopoulos & Kjell G. Salvanes, 2011. "Priceless: The Nonpecuniary Benefits of Schooling," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 159-84, Winter.
  20. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
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Citations

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Cited by:
  1. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2012. "Should we sustain? And if so, sustain what? Consumption or the quality of life?," Working Papers 1222, University of California, Davis, Department of Economics.
  2. John Roemer, 2013. "Once More on Intergenerational Discounting in Climate-Change Analysis: Reply to Partha Dasgupta," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 56(1), pages 141-148, September.
  3. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2010. "North-South Convergence and the Allocation of CO2 Emissions," Working Papers 493, Barcelona Graduate School of Economics.
  4. Michele Lombardi & Roberto Veneziani, 2009. "Liberal Egalitarianism and the Harm Principle," Working Papers 649, Queen Mary, University of London, School of Economics and Finance.
  5. Giménez Gómez, José M. (José Manuel) & Teixidó Figueras, Jordi Josep & Vilella Bach, Misericòrdia, 2014. "The global carbon budget:a conflicting claims problem," Working Papers 2072/237597, Universitat Rovira i Virgili, Department of Economics.
  6. Robert D. Cairns & Vincent Martinet, 2012. "An Environmental-Economic Measure of Sustainable Development," EconomiX Working Papers 2012-2, University of Paris West - Nanterre la Défense, EconomiX.
  7. W. Botzen & Jeroen Bergh, 2014. "Specifications of Social Welfare in Economic Studies of Climate Policy: Overview of Criteria and Related Policy Insights," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 58(1), pages 1-33, May.
  8. Rozenberg, Julie & Vogt-Schilb, Adrien & Hallegatte, Stephane, 2013. "How capital-based instruments facilitate the transition toward a low-carbon economy : a tradeoff between optimality and acceptability," Policy Research Working Paper Series 6609, The World Bank.
  9. Peichl, Andreas & Pestel, Nico, 2011. "Multidimensional Well-Being at the Top: Evidence for Germany," IZA Discussion Papers 6170, Institute for the Study of Labor (IZA).
  10. John Roemer, 2011. "The Ethics of Intertemporal Distribution in a Warming Planet," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(3), pages 363-390, March.
  11. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2010. "Intergenerational Justice When Future Worlds are Uncertain," Working Papers 473, Barcelona Graduate School of Economics.
  12. Dieckhoener, Caroline & Hecking, Harald, 2012. "Greenhouse Gas Abatement Cost Curves of the Residential Heating Market – a Microeconomic Approach," EWI Working Papers 2012-16, Energiewirtschaftliches Institut an der Universitaet zu Koeln.

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