RT info:eu-repo/semantics/article
T1 Non-constant Discounting, Social Welfare and Endogenous Growth with Pollution Externalities
A1 Cabo García, Francisco José
A1 Martín Herrán, Guiomar
A1 Martínez García, María Pilar
K1 Endogenous growth
K1 Environmental policies
K1 non-constant discounting
K1 social welfare
K1 sustainability
K1 time-consistent solutions
AB We analyze the effect of non-constant discounting on economic growth and social welfare in an endogenous growth model with pollution externalities. For time-consistent agents, who play a game against their future selves, the balanced growth equilibrium is compared to the case of standard exponential discounting. A decaying instantaneous discount rate leads to slower growth in a centralized economy, while its effect for a competitive economy is ambiguous. Interestingly, when comparing the planned and the competitive equilibria, the assumption of non-constant discounting may imply greater social welfare in the market equilibrium under two conditions. First, the pollution externality on utility must be large with respect to the externality on production, so that the central planner slows down growth below the growth rate in the market economy. Secondly, individuals’ degree of impatience should decrease sharply with the time distance from the present. Concerning policy implications, we observe that under log-utility policies may not be necessary, while for an isoelastic utility with an elasticity lower than one, introducing policy instruments is less effective than under constant discounting.
PB springer
YR 2020
FD 2020
LK http://uvadoc.uva.es/handle/10324/41009
UL http://uvadoc.uva.es/handle/10324/41009
LA eng
NO Environmental and Resource Economics, 2020, en prensa
NO Producción Científica
DS UVaDOC
RD 28-abr-2024