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Capital Malleability and the Macroeconomic Costs of Climate Policy

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  • Lanzi, Elisa
  • Wing, Ian Sue

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 & Wing, Ian Sue, 2009. "Capital Malleability and the Macroeconomic Costs of Climate Policy," Conference papers 331875, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331875
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    References listed on IDEAS

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    1. Arndt, Channing & Benfica, Rui & Maximiano, Nelson & Nucifora, Antonio M.D. & Thurlow, James, 2008. "Higher fuel and food prices: Economic impacts and responses for Mozambique," IFPRI discussion papers 836, International Food Policy Research Institute (IFPRI).
    2. Benson, Todd & Minot, Nicholas & Pender, John & Robles, Miguel & von Braun, Joachim, 2008. "Global food crises: Monitoring and assessing impact to inform policy responses," Food policy reports 19, International Food Policy Research Institute (IFPRI).
    3. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
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