Firm valuation in an environmental overlapping generations model
AbstractInter-generational externalities associated with the conservation of the environment are usually tackled through fiscal policy. The recent increase in socially responsible investment funds creates a potential role for the stock market to deal with these environmental externalities. We study this alternative approach in an overlapping generations model in which agents choose between investing in clean or polluting technologies. Since agents are short-lived, they do not account for the long-term effects of pollution. We show that when firm property rights are traded separately on a forward looking stock market, proper firm valuation can resolve the conflict between current and future generations.
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Bibliographic InfoPaper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200601.
Date of creation: 2006
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-27 (All new papers)
- NEP-ENE-2006-05-27 (Energy Economics)
- NEP-ENV-2006-05-27 (Environmental Economics)
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.:
- 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.
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