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

  • d'Autume, Antoine
  • Hartwick, John M.
  • Schubert, Katheline

Following Stollery (1998), we extend the Solow-Dasgupta-Heal model to analyze the effects of global warming. The rise in 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 rise in 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 and utility functions are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight on temperature in intratemporal preferences and a larger intertemporal elasticity of substitution both lead to postponing resource use.

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File URL: http://www.sciencedirect.com/science/article/B6V88-4XGBFTP-1/2/0520d8085f96524f8253fa3c0f919565
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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 59 (2010)
Issue (Month): 2 (March)
Pages: 193-207

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Handle: RePEc:eee:matsoc:v:59:y:2010:i:2:p:193-207
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505565

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Antoine D'Autume & Katheline Schubert, 2008. "Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00976395, HAL.
  6. 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.
  7. Kenneth Stollery, 1998. "Constant Utility Paths and Irreversible Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 730-742, August.
  8. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December.
  9. Antoine d'Autume & Katheline Schubert, 2009. "Zero discounting and optimal paths of depletion of an exhaustible resource with an amenity value," Documents de travail du Centre d'Economie de la Sorbonne 09012, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  10. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
  11. repec:cup:cbooks:9780521337465 is not listed on IDEAS
  12. repec:cup:cbooks:9780521331586 is not listed on IDEAS
  13. Mitra, Tapan, 1980. "On Optimal Depletion of Exhaustible Resources: Existence and Characterization Results," Econometrica, Econometric Society, vol. 48(6), pages 1431-50, September.
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