TY - JOUR
T1 - Impatience, pollution, and indeterminacy
AU - Yanase, Akihiko
N1 - Funding Information:
I would like to thank Ken-Ichi Akao, Tohru Naito, Keisuke Osumi, an anonymous referee, and the editor James Bullard for their helpful comments on the earlier versions of the manuscript. I am also grateful to the Ministry of Education, Culture, Sports, Science and Technology for its support of this research under the Grant-in-Aid for Young Scientists (B).
PY - 2011/10
Y1 - 2011/10
N2 - This paper examines an equilibrium growth model in which production activities generate environmental pollution that has a negative welfare effect and in which individual households' subjective discount rate is a function of individual consumption, which is internal to each household, and of total pollution, which is an external factor to the individual agents. It is shown that there may exist multiple steady states and that the dynamic equilibrium may display indeterminacy, depending on the properties of the discount-rate function, the pollution-capital relationship in production technology, and the pollution-consumption relationship in instantaneous utility. The long-run effects of tighter environmental policy are subsequently examined, and the results are also found to be dependent on the above factors.
AB - This paper examines an equilibrium growth model in which production activities generate environmental pollution that has a negative welfare effect and in which individual households' subjective discount rate is a function of individual consumption, which is internal to each household, and of total pollution, which is an external factor to the individual agents. It is shown that there may exist multiple steady states and that the dynamic equilibrium may display indeterminacy, depending on the properties of the discount-rate function, the pollution-capital relationship in production technology, and the pollution-consumption relationship in instantaneous utility. The long-run effects of tighter environmental policy are subsequently examined, and the results are also found to be dependent on the above factors.
KW - Discount-rate function
KW - Indeterminacy of equilibrium path
KW - Neoclassical growth model
KW - Pollution
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U2 - 10.1016/j.jedc.2011.06.010
DO - 10.1016/j.jedc.2011.06.010
M3 - Article
AN - SCOPUS:80052090611
VL - 35
SP - 1789
EP - 1799
JO - Journal of Economic Dynamics and Control
JF - Journal of Economic Dynamics and Control
SN - 0165-1889
IS - 10
ER -
