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Firm valuation in an environmental overlapping generations model

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  • Dam, Lammertjan

    (Groningen University)

Abstract

Inter-generational externalities associated with the conservation of the environment are usually tackled through fiscal policy. The recent increase in socially responsible investment funds creates a potential role for the stock market to deal with these environmental externalities. We study this alternative approach in an overlapping generations model in which agents choose between investing in clean or polluting technologies. Since agents are short-lived, they do not account for the long-term effects of pollution. We show that when firm property rights are traded separately on a forward looking stock market, proper firm valuation can resolve the conflict between current and future generations.

Suggested Citation

  • Dam, Lammertjan, 2006. "Firm valuation in an environmental overlapping generations model," CCSO Working Papers 200601, University of Groningen, CCSO Centre for Economic Research.
    • Handle: RePEc:gro:rugccs:200601
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    File URL: http://irs.ub.rug.nl/ppn/294538070
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    Cited by:

    1. Dam, Lammertjan & Heijdra, Ben J., 2011. "The environmental and macroeconomic effects of socially responsible investment," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1424-1434, September.

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