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Implementing steady state efficiency in overlapping generations economies with environmental externalities

  • Nguyen Thang Dao

    ()

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

  • Julio Davila

    ()

    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

We consider in this paper overlapping generations economies with polution resulting from both consumption and production. The competitive equilibrium steady state is compared to the optimal steady state from the social planner's viewpoint. We show that any competitive equilibrium steady state whose capital-labor ratio exceeds the golden rule ratio is dynamically inefficient. Moreover, the range of dynamically efficient steady states capital ratios increases with the effectiveness of the environment maintainance technology, and decreases for more polluting production technologies. We characterize some tax and transfer policies that decentralize as a competitive equilibrium outcome the social planner's steady state.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00593926.

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Date of creation: Dec 2010
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Handle: RePEc:hal:cesptp:halshs-00593926
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00593926
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  1. JOUVET, Pierre-André & PESTIEAU, Pierre & PONTHIERE, Grégory, . "Longevity and environmental quality in an OLG model," CORE Discussion Papers RP -2377, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. John, A. & Pecchenino, R. & Schimmelpfennig, D. & Schreft, S., 1995. "Short-lived agents and the long-lived environment," Journal of Public Economics, Elsevier, vol. 58(1), pages 127-141, September.
  3. Gutiérrez Huerta, María José, 2002. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," DFAEII Working Papers 2002-23, University of the Basque Country - Department of Foundations of Economic Analysis II.
  4. Smulders, J.A. & Gradus, R.H.J.M., 1993. "The trade-off between environmental care and long-term growth : Pollution in three proto-type growth models," Other publications TiSEM f3ec6de7-f996-4ac0-b872-0, Tilburg University, School of Economics and Management.
  5. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
  6. repec:cup:cbooks:9780521001151 is not listed on IDEAS
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