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Trading off generations: infinitely lived agent versus OLG

  • Schneider, Maik T.

    ()

    (Center of Economic Research at ETH Zurich)

  • Traeger, Christian P.

    ()

    (University of California, Berkeley. Dept of agricultural and resource economics)

  • Winkler, Ralph

    ()

    (University of Bern)

The prevailing literature discusses intergenerational trade-offs in climatechange predominantly in terms of the Ramsey equation relying on the infinitelylived 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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Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 1093R2.

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Length: 42 pages
Date of creation: Mar 2007
Date of revision: Jan 2012
Handle: RePEc:are:cudare:1093r2
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