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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2014, Vol. 9 Issue (1) : 6-24
research-article |
Overlapping Generations and Environmental Policy: An Introduction
Larry Karp()
Agricultural and Resource Economics Department, University of California, Berkeley. Berkeley, CA 94720-3310, USA
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A small but growing body of literature uses overlapping generations (OLG) models to study environmental policy for long-lived problems such as climate change. An OLG model, unlike the infinitely lived representative agent model, distinguishes between impatience with respect to one’s own future utility, and attitudes toward successors’ utility. I discuss the problem of time inconsistency, the role of Markov perfection, and show that a class of OLG models can be studied using methods developed to analyze models of non-constant discounting. An example illustrates the techniques and determines the conditions underwhich, in equilibrium, there is under-investment or over-investment in natural capital.

Keywords overlapping generations      climate policy      time consistency      Markov perfection      under-investment     
Issue Date: 16 May 2014
 Cite this article:   
Larry Karp. Overlapping Generations and Environmental Policy: An Introduction[J]. Front. Econ. China, 2014, 9(1): 6-24.
[1] Dihai Wang, Gaowang Wang, Heng-fu Zou. Competitive Equilibrium in an Overlapping Generations Model with Production Loans[J]. Front. Econ. China, 2017, 12(2): 268-279.
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