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A dynamic analysis of human welfare in a warming planet

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  • Humberto Llavador

    ()

  • John E. Roemer
  • Joaquim Silvestre

Abstract

Climate science indicates that climate stabilization requires low GHG emissions. Is this consistent with nondecreasing human welfare? Our welfare or utility index 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 Pure Sustainability Optimization (or Intergenerational Maximin) criterion, and, second, the Sustainable Growth Optimization criterion, that maximizes the utility 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 utility higher than the level at reference year 2000 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 Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1110.

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Date of creation: Sep 2008
Date of revision: Feb 2010
Handle: RePEc:upf:upfgen:1110

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Web page: http://www.econ.upf.edu/

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Keywords: Climate change; education; Maximin; growth.;

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  1. 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.
  2. Joaquim Silvestre, 2002. "Progress and conservation under Rawls's maximin principle," Social Choice and Welfare, Springer, vol. 19(1), pages 1-27.
  3. 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.
  4. 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.
  5. 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.
  6. Joaquim Silvestre & Joaquim Silvestre & John E. Roemer & Joaquim Silvestre, 2009. "“Intergenerational justice when future worlds are uncertain”," Working Papers 94, University of California, Davis, Department of Economics.
  7. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  8. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
  9. 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.
  10. Salvador Ortigueira, 2000. "A dynamic analysis of an endogenous growth model with leisure," Economic Theory, Springer, vol. 16(1), pages 43-62.
  11. Neumayer, Eric, 1999. "Global warming: discounting is not the issue, but substitutability is," Energy Policy, Elsevier, vol. 27(1), pages 33-43, January.
  12. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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  14. 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.
  15. Arrow Kenneth J, 2007. "Global Climate Change: A Challenge to Policy," The Economists' Voice, De Gruyter, vol. 4(3), pages 1-5, June.
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Citations

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Cited by:
  1. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2010. "Intergenerational Justice When Future Worlds are Uncertain," Working Papers 473, Barcelona Graduate School of Economics.
  2. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2013. "North-South Convergence and the Allocation of CO2 Emissions," Cowles Foundation Discussion Papers 1932, Cowles Foundation for Research in Economics, Yale University.
  3. Michele Lombardi & Roberto Veneziani, 2009. "Liberal Egalitarianism and the Harm Principle," Working Papers 649, Queen Mary, University of London, School of Economics and Finance.
  4. 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.
  5. Andreas Peichl & Nico Pestel, 2011. "Multidimensional Well-Being at the Top: Evidence for Germany," SOEPpapers on Multidisciplinary Panel Data Research 425, DIW Berlin, The German Socio-Economic Panel (SOEP).
  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. 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.
  8. 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.
  9. 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.

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