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Trading Off Generations: Infinitely-Lived Agent Versus OLG

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  • Maik T. Schneider
  • Christian Traeger
  • Ralph Winkler

Abstract

The prevailing literature discusses intergenerational trade-offs predominantly in infinitely-lived agent models despite the finite lifetime of individuals. We discuss these trade-offs in a continuous time OLG framework and relate the 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. Regarding the recent debate on climate change, we conclude that it is indispensable to explicitly consider the generations' life cycles.

Suggested Citation

  • Maik T. Schneider & Christian Traeger & Ralph Winkler, 2010. "Trading Off Generations: Infinitely-Lived Agent Versus OLG," Diskussionsschriften dp1007, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp1007
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Trading Off Generations: Infinitely-Lived Agent Versus OLG
      by Christian Zimmermann in NEP-DGE blog on 2010-06-07 07:25:03
    2. Trading Off Generations: Infinitely-Lived Agent Versus OLG
      by Christian Zimmermann in NEP-DGE blog on 2010-05-04 05:46:22

    Citations

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    Cited by:

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    2. Habla, Wolfgang & Roeder, Kerstin, 2017. "The political economy of mitigation and adaptation," European Economic Review, Elsevier, vol. 92(C), pages 239-257.
    3. Voyvoda, Ebru, 2013. "Energy-Economy-Environment Interaction Using OLG Framework: Evaluation of Alternative Policies under Demographic Transition," Conference papers 332376, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Habla, Wolfgang & Roeder, Kerstin, 2013. "Intergenerational aspects of ecotax reforms – An application to Germany," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 301-318.
    5. Traeger, Christian, 2021. "ACE - Analytic Climate Economy," CEPR Discussion Papers 15968, C.E.P.R. Discussion Papers.
    6. Roeder, Kerstin & Habla, Wolfgang, 2012. "The Political Sustainability of Germany's Environmental Tax Rate," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62060, Verein für Socialpolitik / German Economic Association.
    7. Ekeland, Ivar & Karp, Larry & Sumaila, Rashid, 2015. "Equilibrium resource management with altruistic overlapping generations," Journal of Environmental Economics and Management, Elsevier, vol. 70(C), pages 1-16.
    8. Larry S. Karp, 2012. "Provision of a Public Good with Altruistic Overlapping Generations and Many Tribes," CESifo Working Paper Series 3895, CESifo.

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    More about this item

    Keywords

    climate change; discounting; infinitely-lived agents; intergenerational equity; overlapping generations; time preference;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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