Intergenerational Equity with Individual Impatience in an OLG Model of Optimal and Sustainable Growth

Lee Endress, Sittidaj Pongkijvorasin, James Roumasset and Christopher Wada
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Sittidaj Pongkijvorasin: Chulalongkorn University

No 2013-9, Working Papers from University of Hawaii Economic Research Organization, University of Hawaii at Manoa

Abstract: Among the ethical objections to intergenerational impartiality is the violation of consumer sovereignty given that individuals are impatient. We accommodate that concern by distinguishing intra- and inter-generational discounting in an OLG model suitable for analyzing sustainability issues. Under the assumption of constant elasticity of marginal felicity, the optimum trajectory of aggregate consumption is guided, via the Ramsey condition, by the intergenerational discount rate but not the personal discount rate. In an economy with produced capital and a renewable resource, intergenerational neutrality results in a sustained growth path, without the necessity of a sustainability constraint, even in the presence of intragenerational impatience. We also find that green net national product remains constant along the optimal approach path to golden rule consumption.

Keywords: Sustainability of optimal growth; intergenerational equity; intra-generational discounting; renewable resources; GNNP (search for similar items in EconPapers)
JEL-codes: Q01 Q41 Q56 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2013-10
New Economics Papers: this item is included in nep-dge, nep-env and nep-fdg
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