Preferences and pollution cycles
David Desmarchelier () and
Lionel Ragot ()
No 2016.03, Working Papers from FAERE - French Association of Environmental and Resource Economists
We consider a competitive Ramsey economy where a pollution externality affects both consumption demand and labor supply, and we assume the stock of pollution to be persistent over time. Surprisingly, when pollution jointly increases the consumption demand (compensation effect) and lowers the labor supply (leisure effect), multiple equilibria arise near the steady state (local indeterminacy) through a Hopf bifurcation (limit cycle). This result challenges the standard view of pollution as a flow to obtain local indeterminacy, and depends on the leisure effect which renders the pollution accumulation process more volatile.
Keywords: Pollution; Endogenous labor supply; Limit cycle; Ramsey model (search for similar items in EconPapers)
JEL-codes: E32 O44 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-mac
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http://faere.fr/pub/WorkingPapers/Bosi_Desmarchelier_Ragot_FAERE_WP2016_03.pdf First version, 2016 (application/pdf)
Working Paper: Preferences and pollution cycles (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2016.03
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