Pollution perception. An inquiry into intergenerational equity

Ingmar Schuhmacher and Benteng Zou
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Ingmar Schuhmacher: Center for Mathematical Economics, Bielefeld University
Authors registered in the RePEc Author Service: Ingmar Schumacher

No 371, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: In this article we extend the recent literature on overlapping generations with a pollution sector by allowing generations to have a certain pollution perception with regards to the stock of pollution. Pollution perception, assumed to be part of the generations' preferences, can be either a concern for the flow of pollution only, or for the stock, or anything in between. We analyse the different steady states for their implications on intergenerational equity. Our main result is that if generations are only partly concerned with the actual stock of pollution, then periodic cycling will occur. We use the concept of Intergenerational Moral Intuition to analyse this periodic cycling. Our main policy conclusion is that decision makers who would like to achieve intergenerational equitable outcomes must either use the maximin criterion or take decisions spanning several generations in order to avoid the period cycling effect.

Keywords: Pollution; Welfare analysis; Overlapping generations; Flip bifurcation; Intergenerational equity (search for similar items in EconPapers)
Date: 2011-08-12
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:371

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