A note on pollution inertia and endogenous cycles in Ramsey economies

Estelle Campenet and David Desmarchelier

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: The literature has highlighted the potential occurrence of a limit cycle through a Hopf bifurcation near the steady state of a competitive Ramsey economy when pollution significantly increases the marginal utility of consumption (compensation effect). This latter condition is necessary but not sufficient. More specifically, pollution inertia must be strong when pollution originates from production but not when it stems from consumption. This paper investigates the reasons for this difference and emphasizes the role of decreasing marginal productivity of capital in explaining it.

Keywords: Ramsey model; Pollution inertia; Hopf bifurcation. (search for similar items in EconPapers)
JEL-codes: E32 O44 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2025-10

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