Environmental Damage and Price Taking Behaviour by Firms and Consumers
AbstractIntegrated assessment models lack a microeconomic foundation in modelling environmental damages to the economy. To overcome this, damage coefficients are incorporated in standard microeconomic models. Firms and consumers take both damages and prices as given. Demand, supply, profit and expenditure functions under damage coefficients are derived that allow easy implementation in applied economic models through appropriate price distortions related to such coefficients. For the consumer, Slutsky's equations are derived. The different speeds of equilibrium adjustment in economic and climate models is reconciled in the Recursive Equilibrium with Environmental Damages (REED). An exchange economy and Robinson Crusoe economy illustrate our approach.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 878.
Length: 25 p.
Date of creation: 2009
Date of revision:
environmental damage; substitution effects; income effects; Slutsky's equations; equilibrium;
Other versions of this item:
- Harold Houba & Hans Kremers, 2009. "Environmental Damage and Price Taking Behaviour by Firms and Consumers," Tinbergen Institute Discussion Papers 09-029/1, Tinbergen Institute.
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-25 (All new papers)
- NEP-ENV-2009-04-25 (Environmental Economics)
- NEP-RES-2009-04-25 (Resource 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.:
- Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
- Brock, William A. & de Zeeuw, Aart, 2002.
"The repeated lake game,"
Elsevier, vol. 76(1), pages 109-114, June.
- Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
- Claudia Kemfert & Hans Kremers, 2009. "The Cost of Climate Change to the German Fruit Vegetation Sector," Discussion Papers of DIW Berlin 857, DIW Berlin, German Institute for Economic Research.
- Victor Ginsburgh & Michiel Keyzer, 2002.
"The structure of applied general equilibrium models,"
ULB Institutional Repository
2013/3313, ULB -- Universite Libre de Bruxelles.
- Victor Ginsburgh & Michiel Keyzer, 2002. "The Structure of Applied General Equilibrium Models," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262571579, June.
- Victor Ginsburgh & Michiel Keyzer, 1997. "The structure of applied general equilibrium models," ULB Institutional Repository 2013/1653, ULB -- Universite Libre de Bruxelles.
- Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change. Part 1: Benchmark Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(1), pages 47-73, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek).
If references are entirely missing, you can add them using this form.