Diskontraten: Endogen oder nicht endogen? / Disounting: Endogenous or not Endogenous?: Eine umweltrelevante Fragestellung / Implications for the Environment

Karen Pittel

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2005, vol. 225, issue 4, 441-458

Abstract: This paper explores implications that arise for growth and environmental policy when discount rates are endogenous. Standard growth models usually assume discount rates to be independent of any economic or environmental considerations. In our paper we argue that discount rates depend upon the state of the environment.We develop a simple linear economy with recursive preferences in which production generates pollution. It is shown that even in this simple economy endogenous discounting matters with respect to optimal growth and environmental quality. Yet whether growth and environment are affected positively or negatively by the endogeneity of discount rates crucially depends on the way in which environmental quality influences the discount rate.Even if exogenous and endogenous discount rates are identical, optimal environmental quality and growth differ along the equilibrium growth path. This shows that not only the level, but also the determination of discount rates matter with respect to optimal long-run development. With respect to the decentralized solution it is shown that endogenous discounting exerts no effect on growth and environmental quality. As households perceive environmental quality to be exogenous to their decisions, their optimization is unaffected by the endogeneity of discounting

Keywords: Endogenous discounting; endogenous growth; sustainability; Endogene Diskontierung; endogenes Wachstum; Nachhaltigkeit; Endogenous discounting; endogenous growth; sustainability (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:225:y:2005:i:4:p:441-458

DOI: 10.1515/jbnst-2005-0406

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