Intergenerational externalities, sustainability and welfare—The ambiguous effect of optimal policies on resource depletion

Simone Valente

Resource and Energy Economics, 2011, vol. 33, issue 4, 995-1014

Abstract: This paper studies an endogenous growth model with exhaustible resources, overlapping generations and human capital externalities. In the competitive equilibrium, selfish behavior and inefficient skills accumulation may prevent sustained growth. Implementing the utilitarian optimum likely induces sustainability via increased knowledge formation, but resource depletion may be faster or slower than under laissez-faire depending on the social discount rate. Heavy (modest) social discounting delays (anticipates) the achievement of net welfare gains for newborn agents and successors. The reason is that human capital accumulation magnifies the positive growth effects of policies that lower the rate of resource destruction, preserving the welfare of newborn agents. Resource-depleting policies, instead, hamper growth and reduce lifetime welfare of early-in-time generations—the first loser being the currently young.

Keywords: Endogenous growth; Exhaustible resources; Human capital; Overlapping generations; Intergenerational distribution; Sustainability (search for similar items in EconPapers)
JEL-codes: J24 O11 Q32 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:33:y:2011:i:4:p:995-1014

DOI: 10.1016/j.reseneeco.2010.09.001

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