Pollution permits, green taxes, and the environmental poverty trap

We extend the dynamic Heckscher–Ohlin model in Bond et al. [Economic Theory(48, 171–204, 2011)] and show that if the labor-intensive good is inferior, then there may exist multiple steady states in autarky and poverty traps can arise. Poverty traps for the world economy, in the form of Pareto-dominated steady states, are also shown to exist. We show that the opening of trade can have the effect of pulling the initially poorer country out of a poverty trap, with both countries having steady state capital stocks exceeding the autarky level. However, trade can also pull an initially richer country into a poverty trap. These possibilities are a sharp contrast with dynamic Heckscher–Ohlin models with normality in consumption, where the country with the larger (smaller) capital stock than the other will reach a steady state where the level of welfare is higher (lower) than in the autarkic steady state.

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INHERITED TASTES AND ENDOGENOUS LONGEVITY

Macroeconomic Dynamics ◽

10.1017/s1365100516001322 ◽

2017 ◽

Vol 23 (2) ◽

pp. 674-698 ◽

Cited By ~ 2

Author(s):

Luciano Fanti ◽

Luca Gori ◽

Cristiana Mammana ◽

Elisabetta Michetti

Keyword(s):

Steady State ◽

Overlapping Generations ◽

Standard Of Living ◽

Poverty Trap ◽

Individual State ◽

State Of Health ◽

Tax Rate ◽

Public Investments ◽

The Individual ◽

Endogenous Longevity

This article aims at studying a general equilibrium model with overlapping generations that incorporates inherited tastes (aspirations) and endogenous longevity. The existence of standard-of-living aspirations transmitted between two subsequent generations in a context where the individual state of health depends on public investments in health has some remarkable consequences at the macroeconomic level. First, aspirations allow escaping from the well-known poverty trap scenario described by Chakraborty (2004). Second, the steady-state equilibrium may be destabilized through a super-critical Neimark–Sacker bifurcation when the health tax rate is set at too high or too low a level. This causes endogenous fluctuations in income and longevity.

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A Dynamic Analysis of Child Labor with a Variable Rate of Discount: Some Policy Implications

The B E Journal of Economic Analysis & Policy ◽

10.1515/1538-0645.1562 ◽

2006 ◽

Vol 5 (1) ◽

Cited By ~ 4

Author(s):

Satya P Das ◽

Rajat Deb

Keyword(s):

Discount Rate ◽

Child Labor ◽

Time Preference ◽

Infinite Horizon ◽

Policy Implications ◽

Poverty Trap ◽

Variable Rate ◽

Lump Sum ◽

Long Run ◽

Short Run

AbstractThis paper analyzes the problem of child labor in an infinite-horizon dynamic model with a variable rate of time preference and credit constraints. The variability in the rate of time preference leads to the possibility of multiple steady states and a poverty trap. The paper considers the long-run and short-run effects of an array of policies like enrollment subsidy, improvement in primary education infrastructure, lump-sum subsidy, and variations in loan market parameters. We distinguish between policies that reduce child labor in the long run only in the presence of a variable discount rate and other policies which work whether or not the discount rate is variable. Credit-related policies belong to the former group. Policies that reduce child labor and increase family consumption in the long run may have an adverse effect of lowering consumption in the short run.

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