Self-enforcing intergenerational social contract as a source of Pareto improvement and emission mitigation

Kerstin Burghaus, Thang Nguyen Dao and Ottmar Edenhofer

VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association

Abstract: We consider, in a general equilibrium overlapping generations (OLG) model with environmental externalities, a contract between successive generations, whereby agents of the current working-age generation privately invest a share of their labor income in pollution mitigation in exchange for a transfer to their old-age capital income paid by the next generation. We analyze under which conditions there exist contracts which are Pareto-improving compared to an equilibrium without contract and characterize the set of Pareto-improving mitigation-transfer combinations, the Pareto frontier and the Nash bargaining solution. Further, we prove that steady state emissions under a Pareto-improving contract are lower than without a contract. In the second part of the paper, we study a non-cooperative setting, taking into account that credibly committing to a contract might not be possible. We show that there exists mitigation transfer schemes which are both Pareto-improving and give no generation an incentive to deviate from the provisions of the contract.

JEL-codes: C72 D70 Q52 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-ene, nep-env and nep-gth
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/113135/1/VfS_2015_pid_500.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc15:113135

Access Statistics for this paper

More papers in VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().