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Trading off generations: Equity, discounting, and climate change

  • Schneider, Maik T.
  • Traeger, Christian P.
  • Winkler, Ralph

The prevailing literature discusses intergenerational trade-offs in climate change predominantly in terms of the Ramsey equation relying on the infinitely lived agent model. We discuss these trade-offs in a continuous time OLG framework and relate our results to the infinitely lived agent setting. We identify three shortcomings of the latter: first, underlying normative assumptions about social preferences cannot be deduced unambiguously. Second, the distribution among generations living at the same time cannot be captured. Third, the optimal solution may not be implementable in overlapping generations market economies.

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File URL: http://www.sciencedirect.com/science/article/pii/S0014292112001146
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 8 ()
Pages: 1621-1644

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:8:p:1621-1644
DOI: 10.1016/j.euroecorev.2012.08.006
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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