The political economy of environmental policy with overlapping generations

Karp, L. & Rezai, A. (2014). The political economy of environmental policy with overlapping generations. International Economic Review 55 (3) 711-733. 10.1111/iere.12068.

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A two-sector overlapping generations model illuminates the intergenerational effects of a tax that protects an environmental stock. A traded asset capitalizes the economic returns to future tax-induced environmental improvements, benefiting the current asset owners, the old generation. Absent a transfer, the tax harms the young generation by decreasing their real wage. Future generations benefit from the tax-induced improvement in environmental stock. The principal intergenerational conflict arising from the tax is between generations alive at the time society imposes the policy, not between generations alive at different times. A Pareto-improving tax can be implemented under various political economy settings.

Item Type: Article
Research Programs: Risk, Policy and Vulnerability (RPV)
Risk & Resilience (RISK)
Bibliographic Reference: International Economic Review; 55(3):711-733 (August 2014) (Published online 28 July 2014)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:50
Last Modified: 27 Aug 2021 17:39

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