Microeconomic models of a production economy with environmental externalities

Marco Rogna

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, 2020, vol. 22, issue 3, No 46, 2625-2650

Abstract: Abstract The environmental issue has surely become a central theme in the economic debate. From one side, this is analysed through large empirical models, solved numerically, that describe explicitly production and consumption\utility functions. On the other side, when environmental problems have a multinational dimension or, simply, involve a multiplicity of stakeholders, the game theoretical approach, focused on the strategic dimension of this problem, offers analytic solutions based on simple utility functions having only pollution and\or abatement as arguments. Although there are examples of large-scale empirical models taking into account game theoretical insights, the diversity in representing the same problem constitutes a gap for these two economic approaches to find a better integration. The present paper tries to bridge the mentioned gap by offering a family of models enough simple to be solved analytically, but where production and consumption, together with environmental aspects, are explicitly portrayed. Although the paper does not tackle directly the game theoretical aspect, the aim of the proposed family of models is to be used in game theoretical analysis in order to improve their representation of the economic–environmental linkage. Furthermore, in the proposed models, the negative consequences of pollution are divided into their detrimental effect on production activities and on utility. This last aspect is modelled in a novel way through the direct introduction into the utility function of an hypothetical environmental good whose consumption’s possibilities are diminished by pollution.

Keywords: Environmental externalities; Microeconomic models; Optimal taxation; Utility (search for similar items in EconPapers)
JEL-codes: D51 D62 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10668-019-00313-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:endesu:v:22:y:2020:i:3:d:10.1007_s10668-019-00313-8

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/10668

DOI: 10.1007/s10668-019-00313-8

Access Statistics for this article

Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development is currently edited by Luc Hens

More articles in Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().