Capital Malleability and the Macroeconomic Costs of Climate Policy
AbstractThis paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital. When capital is imperfectly malleable a carbon policy is less effective than under the assumption of perfect malleability of capital. Therefore, it is important that, especially for the analysis of short-term environmental regulations, the issue of capital malleability is taken into consideration.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.19.
Date of creation: Feb 2010
Date of revision:
General Equilibrium; CGE Models; Climate Change Policy;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-06 (All new papers)
- NEP-CMP-2010-03-06 (Computational Economics)
- NEP-ENE-2010-03-06 (Energy Economics)
- NEP-ENV-2010-03-06 (Environmental Economics)
- NEP-REG-2010-03-06 (Regulation)
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