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Now or Never: Environmental Protection under Hyperbolic Discounting

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Author Info
Winkler, Ralph

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Abstract

The author analyzes the optimal investment in environmental protection in a model of an infinite series of non-overlapping hyperbolically discounting agents. He shows that without a commitment mechanism society is eventually stuck in a situation where all agents prefer further investment in the long run, yet neither present nor future agents will actually ever invest. Such an outcome is not only unsatisfactory for each generation but may also be inefficient in a Pareto sense. The author's results are consistent with real world observations, and thus provide a new explanation for weak environmental policy performance. --

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Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2009-4.

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Date of creation: 2009
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Handle: RePEc:zbw:ifwedp:7483

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Related research
Keywords: Environmental policy; environmental protection; hyperbolic discounting; Markov perfect equilibria; tme-inconsistency;

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Find related papers by JEL classification:
Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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References listed on IDEAS
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.:
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    Other versions:
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  27. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Yohe, Gary W. & Tol, Richard S. J. & Anthoff, David, 2009. "Discounting for Climate Change," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(24), pages 1-22. [Downloadable!]
    Other versions:
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