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Modeling the Economics of Greenhouse Gas Abatement: An Overlapping Generations Perspective

  • Tobias Rasmussen

    (International Monetary Fund)

This paper analyzes the implications of using an overlapping generations model for simulating the effects of greenhouse gas abatement policies rather than the traditional approach based on an infinitely lived agent. The overlapping generations framework has many appealing characteristics. In particular, by not aggregating different generations, it avoids imposing implicitly a social welfare function that discounts the utility of people living in the future. The results show that the costs of imposing a tax on CO2 emissions are highly unequally distributed. Generations to be born a century from now stand to incur substantial losses while those alive in the near future will suffer much less and the current old may even experience a gain. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 99-119

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:99-119
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  1. Rasmussen, Tobias N. & Rutherford, Thomas F., 2004. "Modeling overlapping generations in a complementarity format," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1383-1409, April.
  2. Kehoe, Timothy J & Levine, David K, 1985. "Comparative Statics and Perfect Foresight in Infinite Horizon Economies," Econometrica, Econometric Society, vol. 53(2), pages 433-53, March.
  3. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  4. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
  5. David Altig & Charles T. Carlstrom, 1996. "Marginal tax rates and income inequality in a life-cycle model," Working Paper 9621, Federal Reserve Bank of Cleveland.
  6. David Altig, 2001. "Simulating Fundamental Tax Reform in the United States," American Economic Review, American Economic Association, vol. 91(3), pages 574-595, June.
  7. Jorgenson, Dale W. & Wilcoxen, Peter J., 1993. "Reducing US carbon emissions: an econometric general equilibrium assessment," Resource and Energy Economics, Elsevier, vol. 15(1), pages 7-25, March.
  8. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  9. Laurence J. Kotlikoff, 1998. "The A-K Model: It's Past, Present, and Future," NBER Working Papers 6684, National Bureau of Economic Research, Inc.
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