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Capital Malleability and the Macroeconomic Costs of Climate Policy

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Listed:
  • Lanzi, Elisa
  • Sue Wing, Ian

Abstract

This paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital. When capital is imperfectly malleable a carbon policy is less effective than under the assumption of perfect malleability of capital. Therefore, it is important that, especially for the analysis of short-term environmental regulations, the issue of capital malleability is taken into consideration.

Suggested Citation

  • Lanzi, Elisa & Sue Wing, Ian, 2010. "Capital Malleability and the Macroeconomic Costs of Climate Policy," Sustainable Development Papers 59476, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemdp:59476
    DOI: 10.22004/ag.econ.59476
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    References listed on IDEAS

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    1. Samuel de Abreu Pessoa & Silvia Matos Pessoa & Rafael Rob, 2005. "Elasticity of Substitution between Capital and Labor and its applications to growth and development," PIER Working Paper Archive 05-012, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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