The Political economy of environmental policy with overlapping generations

A two-sector OLG model illuminates previously unexamined intergenerational effects 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 from the tax-induced improvement in environmental stock. The principal intergenerational conflict arising from public policy is between generations alive 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.


Issue Date:
May 07 2012
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/123718
Total Pages:
45
JEL Codes:
E24; H23; Q20; Q52; Q54
Series Statement:
CUDARE Working Papers
1128




 Record created 2017-04-01, last modified 2017-08-26

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