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A note on pollution inertia and endogenous cycles in Ramsey economies

Author

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  • Estelle CAMPENET
  • David DESMARCHELIER

Abstract

The literature has highlighted the potential occurrence of a limit cycle through a Hopf bifurcation near the steady state of a competitive Ramsey economy when pollution significantly increases the marginal utility of consumption (compensation effect). This latter condition is necessary but not sufficient. More specifically, pollution inertia must be strong when pollution originates from production but not when it stems from consumption. This paper investigates the reasons for this difference and emphasizes the role of decreasing marginal productivity of capital in explaining it.

Suggested Citation

  • Estelle CAMPENET & David DESMARCHELIER, 2025. "A note on pollution inertia and endogenous cycles in Ramsey economies," Working Papers of BETA 2025-10, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2025-10
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    File URL: http://beta.u-strasbg.fr/WP/2025/2025-10.pdf
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    More about this item

    Keywords

    Ramsey model; Pollution inertia; Hopf bifurcation.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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