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The Political economy of environmental policy with overlapping generations

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  • Karp, Larry
  • Rezai, Amon

Abstract

A two-sector OLG model illuminates previously unexamined intergenerationaleffects of a tax that protects an environmental stock. A traded asset capitalizes the economic returns to future tax-induced environmental improvements, benefiting the current asset owners, the old generation. Absent a transfer, the tax harms the young generation by decreasing their real wage. Future generations benefit fromthe tax-induced improvement in environmental stock. The principalintergenerational conflict arising from public policy is between generationsalive at the time society imposes the policy, not between generations alive at different times. A Pareto-improving policy can be implemented under various political economy settings.

Suggested Citation

  • Karp, Larry & Rezai, Amon, 2012. "The Political economy of environmental policy with overlapping generations," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt67v8k1v5, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt67v8k1v5
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    1. repec:eee:eecrev:v:96:y:2017:i:c:p:1-17 is not listed on IDEAS
    2. Karp, Larry & Rezai, Armon, 2017. "Asset prices and climate policy," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6fx579fp, Department of Agricultural & Resource Economics, UC Berkeley.
    3. Jan Siegmeier & Linus Mattauch & Max Franks & David Klenert & Anselm Schultes & Ottmar Edenhofer, 2015. "A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare," Working Papers 2015.31, Fondazione Eni Enrico Mattei.
    4. Rezai, Armon & van der Ploeg, Frederick, 2014. "Abandoning Fossil Fuel: How Fast And How Much?," CEPR Discussion Papers 9921, C.E.P.R. Discussion Papers.
    5. Gerlagh, Reyer & Jaimes, Richard & Motavasseli, Ali, 2017. "Global demographic change and climate policies," Discussion Paper 2017-035, Tilburg University, Center for Economic Research.
    6. Karine Constant & Marion Davin, 2018. "Unequal vulnerability to climate change and the transmission of adverse effects through international trade," CEE-M Working Papers 18-05, CEE-M, Universitiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    7. Habla, Wolfgang & Roeder, Kerstin, 2017. "The political economy of mitigation and adaptation," European Economic Review, Elsevier, vol. 92(C), pages 239-257.
    8. Stan Metcalfe, 2014. "George Shackle and The Schumpeterian Legacy," Graz Economics Papers 2014-08, University of Graz, Department of Economics.
    9. Laurence J. Kotlikoff & Andrey Polbin & Andrey Zubarev, 2016. "Will the Paris Accord Accelerate Climate Change?," NBER Working Papers 22731, National Bureau of Economic Research, Inc.
    10. Lugovoy, O. & Polbin, A., 2016. "On Intergenerational Distribution of the Burden of Greenhouse Gas Emissions," Journal of the New Economic Association, New Economic Association, vol. 31(3), pages 12-39.
    11. Torben M. Andersen & Joydeep Bhattacharya & Pan Liu, 2016. "Resolving Intergenerational Conflict over the Environment under the Pareto Criterion," CESifo Working Paper Series 6053, CESifo Group Munich.
    12. Michael Hoel & Sverre A.C. Kittelsen & Snorre Kverndokk, 2015. "Pareto Improving Climate Policies: Distributing the Benefits across Generations and Regions," CESifo Working Paper Series 5487, CESifo Group Munich.
    13. Karine Constant & Marion Davin, 2018. "Unequal vulnerability to climate change and the transmission of adverse effects through international trade," Working Papers 2018.01, FAERE - French Association of Environmental and Resource Economists.
    14. repec:eee:jeeman:v:88:y:2018:i:c:p:366-378 is not listed on IDEAS

    More about this item

    Keywords

    Life Sciences; Social and Behavioral Sciences; open-access resource; two-sector overlapping generations; resource tax; generational conflict; environmental policy; dynamic bargaining;

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