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The zero discounting and maximin optimal paths in a simple model of global warming

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Abstract

Following Stollery [1998], we extend the Solow, Dasgupta-Heal model to analyze the effects of global warning. The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The riise of temperature affects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production function and utility function are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in the preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2009/09013.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 09013.

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Length: 22 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:mse:cesdoc:09013

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Keywords: Maximin; zero-discounting; global warming.;

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  1. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465.
  2. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
  3. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  4. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer, vol. 15(4), pages 360-394, August.
  5. Antoine d’Autume & Katheline Schubert, 2008. "Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value," Revue d'économie politique, Dalloz, vol. 0(6), pages 827-845.
  6. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 551-56, April.
  7. Farzin, Y H & Tahvonen, O, 1996. "Global Carbon Cycle and the Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 515-36, October.
  8. Antoine d'Autume & Katheline Schubert, 2008. "Hartwick's rule and maximin paths when the exhaustible resource has an amenity value," Documents de travail du Centre d'Economie de la Sorbonne v08031, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  9. Mitra, Tapan, 1980. "On Optimal Depletion of Exhaustible Resources: Existence and Characterization Results," Econometrica, Econometric Society, vol. 48(6), pages 1431-50, September.
  10. Kenneth Stollery, 1998. "Constant Utility Paths and Irreversible Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 730-742, August.
  11. Cairns, Robert D. & Long, Ngo Van, 2006. "Maximin: a direct approach to sustainability," Environment and Development Economics, Cambridge University Press, vol. 11(03), pages 275-300, June.
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Cited by:
  1. Ngo Van Long & Vincent Martinet, 2012. "Combining Rights and Welfarism: A New Approach to Intertemporal Evaluation of Social Alternatives," CESifo Working Paper Series 3746, CESifo Group Munich.
  2. Bazhanov, Andrei, 2013. "Inefficiency and Sustainability," MPRA Paper 51815, University Library of Munich, Germany.

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