The Political economy of environmental policy with overlapping generations

Larry Karp and Armon Rezai

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: A two-sector OLG model illuminates previously unexamined intergenerationaleffects 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 fromthe tax-induced improvement in environmental stock. The principalintergenerational conflict arising from public policy is between generationsalive 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.

Keywords: Life Sciences; Social and Behavioral Sciences; open-access resource; two-sector overlapping generations; resource tax; generational conflict; environmental policy; dynamic bargaining (search for similar items in EconPapers)
Date: 2012-05-07
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env, nep-pol and nep-res
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Citations: View citations in EconPapers (2)

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Working Paper: The Political economy of environmental policy with overlapping generations (2012)
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