The Political economy of environmental policy with overlapping generations

Larry Karp and Armon Rezai

No 123718, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: A two-sector OLG model illuminates previously unexamined intergenerational effects of a tax that protects an environmental stock. A traded asset capitalizes the economic returns to future tax-induced environmental improvements, benefiting the current asset owners, the old generation. Absent a transfer, the tax harms the young generation by decreasing their real wage. Future generations benefit from the tax-induced improvement in environmental stock. The principal intergenerational conflict arising from public policy is between generations alive at the time society imposes the policy, not between generations alive at different times. A Pareto-improving policy can be implemented under various political economy settings.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 45
Date: 2012-05-07
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Citations: View citations in EconPapers (2)

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Working Paper: The Political economy of environmental policy with overlapping generations (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:123718

DOI: 10.22004/ag.econ.123718

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