Environmental discounting in a small open economy with a renewable resource

Koichi Futagami and Yasuhiro Nakamoto ()

No 10-22, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: We construct a small open economy model with a renewable resource. Households have an endogenous time preference rate that depends on the level of the renewable resource in the domestic economy. Although households know that the degree of own patience depends on its resource, we assume that households believe that they cannot control the motion of the aggregate renewable resource. This is because they think that their impact is negligible so that there exists an externality in the form of the patience of the households. Based on this framework, we analyze the dynamic character of the steady state and show that the equilibrium path may be indeterminate. We next examine the welfare effects of tax policies. Finally, we investigate socially optimal tax policies.

Keywords: Endogenous time preference rate; Indeterminacy; Renewable resources; Optimal tax policy (search for similar items in EconPapers)
JEL-codes: F41 H21 Q28 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2010-07
New Economics Papers: this item is included in nep-dge, nep-env and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1022

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