Environmental and population externalities
In this paper, we investigate the external effects of the parent's decisions on the number of newly born children and the firm's decisions on the amount of polluting emissions that occur in industrial production. We employ an optimal control model which comprises three stock variables representing population, the economic capital stock and the pollutant immissions in the natural environment. We distinguish two different types of households, in which the decision on the number of births takes place. These two types may be regarded as two extremes: dynastic households, in which the family sticks together forever and micro-households, in which children leave their parent's household immediately after birth. We conclude that in both cases the decentralized outcome is not optimal due to two externalities: one occurs in the individual decision on polluting emissions, the other one in the individual decision on the number of births. It turns out that whereas the environmental externality is of the same form in both cases, the type of external effect from the household's decision on fertility is qualitatively different. The different types of population externalities require different policy instruments in order to internalize them. We discuss a Pigouvian tax on emissions as well as taxes on population: if an appropriate tax on the household size is applied in the case of dynastic households and an appropriate tax on children is applied in the case of small households a first best development of the economy is obtained.
|Date of creation:||Aug 2006|
|Date of revision:||Aug 2006|
|Contact details of provider:|| Postal: Grabengasse 14, D-69117 Heidelberg|
Phone: +49-6221-54 2905
Fax: +49-6221-54 2914
Web page: http://www.awi.uni-heidelberg.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Raut, L K & Srinivasan, T N, 1994. "Dynamics of Endogenous Growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(5), pages 777-90, August.
- Pethig, Rudiger, 2006.
"Non-linear production, abatement, pollution and materials balance reconsidered,"
Journal of Environmental Economics and Management,
Elsevier, vol. 51(2), pages 185-204, March.
- Rüdiger Pethig, 2005. "Nonlinear Production, Abatement, Pollution and Materials Balance Reconsidered," CESifo Working Paper Series 1549, CESifo Group Munich.
- Harford, Jon D, 1998. "The Ultimate Externality," American Economic Review, American Economic Association, vol. 88(1), pages 260-65, March.
- Till Requate & Mark B. Cronshaw, 1997. "Population size and environmental quality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 10(3), pages 299-316.
- Srinivasan, T.N. & Robinson, J.A., 1995.
"Long-Term Consequences of Population Growth: Technological Change, Natural Resources, and the Environment,"
748, Yale - Economic Growth Center.
- Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298 Elsevier.
- Galor, Oded & Weil, David, 1999.
"From Malthusian Stagnation to Modern Growth,"
CEPR Discussion Papers
2082, C.E.P.R. Discussion Papers.
- Michel, Philippe, 1982.
"On the Transversality Condition in Infinite Horizon Optimal Problems,"
Econometric Society, vol. 50(4), pages 975-85, July.
- Michel, P., 1980. "On the Transversality Condition in Infinite Horizon Optimal Problems," Cahiers de recherche 8024, Universite de Montreal, Departement de sciences economiques.
- Edward L. Glaeser & Gary S. Becker & Kevin M. Murphy, 1999. "Population and Economic Growth," American Economic Review, American Economic Association, vol. 89(2), pages 145-149, May.
- Harford, Jon D., 1997. "Stock Pollution, Child-Bearing Externalities, and the Social Discount Rate," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 94-105, May.
- Partha Dasgupta, 2000. "Population and Resources: An Exploration of Reproductive and Environmental Externalities," Population and Development Review, The Population Council, Inc., vol. 26(4), pages 643-689.
When requesting a correction, please mention this item's handle: RePEc:awi:wpaper:0427. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gabi Rauscher)
If references are entirely missing, you can add them using this form.