Impatience, pollution, and indeterminacy

Akihiko Yanase

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)

    Abstract

    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.

    Original languageEnglish
    Pages (from-to)1789-1799
    Number of pages11
    JournalJournal of Economic Dynamics and Control
    Volume35
    Issue number10
    DOIs
    Publication statusPublished - 2011 Oct

    Keywords

    • Discount-rate function
    • Indeterminacy of equilibrium path
    • Neoclassical growth model
    • Pollution

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Control and Optimization
    • Applied Mathematics

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