Overlapping Generations and Environmental Policy: An Introduction

Larry Karp

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2014, vol. 9, issue 1, 6-24

Abstract: A small but growing body of literature uses overlapping generations (OLG) models to study environmental policy for long-lived problems such as climate change. An OLG model, unlike the infinitely lived representative agent model, distinguishes between impatience with respect to one¡¯s own future utility, and attitudes toward successors' utility. I discuss the problem of time inconsistency, the role of Markov perfection, and show that a class of OLG models can be studied using methods developed to analyze models of non-constant discounting. An example illustrates the techniques and determines the conditions underwhich, in equilibrium, there is under-investment or over-investment in natural capital.

Keywords: overlapping generations; climate policy; time consistency; Markov perfection; under-investment (search for similar items in EconPapers)
JEL-codes: C73 D62 D63 D64 H41 Q54 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fec:journl:v:9:y:2014:i:1:p:6-24

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