scholarly journals External Habits Formation and the Environment

2021 ◽  
Vol 67 (1) ◽  
pp. 1-12
Author(s):  
Fatma Safi
Keyword(s):  
Utility Function ◽  
Environmental Quality ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Competitive Equilibrium ◽  
Cohort Size ◽  
Overlapping Generations Model ◽  
The Impact

Abstract The present paper presents a standard overlapping generations model with external habits formation and environmental quality in the utility function. Our main objective is to study the impact of external habits on capital accumulation and environmental quality on the intertemporal competitive equilibrium. We notice that striving for status leads to environment worsening and capital increasing when the cohort size is large.

scholarly journals The impact of green preferences on the relevance of history versus expectations

2019 ◽  
Vol 24 (6) ◽  
pp. 583-607
Author(s):  
Andreas Schaefer ◽  
Anna Stünzi
Keyword(s):  
Steady State ◽  
Overlapping Generations ◽  
Clean Energy ◽  
Environmental Policies ◽  
Stable Steady State ◽  
Overlapping Generations Model ◽  
Environmental Preferences ◽  
Energy Taxes ◽  
Energy Tax ◽  
The Impact

AbstractIn an overlapping generations model with multiple steady states, we analyse the impact of endogenous environmental policies on the relevance of history and expectations for the equilibrium selection. In a polluting regime, environmental preferences cause an increasing energy tax which raises the risk that the economy transitions to the inferior equilibrium under pessimistic expectations. However, higher environmental preferences imply an earlier switch to the clean energy regime. Then, the conflict between production and environmental preferences is resolved and the prospects of selecting the superior equilibrium improve, since positive expectations become more relevant. In an empirical analysis we find that people with environmental preferences tend to have more optimistic expectations about economic development. Using these findings to analyse the steady-state dynamics implies that agents with environmental preferences support higher energy taxes and switch to clean production more quickly. Due to their optimism, the likelihood of reaching the superior stable steady state increases.

CHOICE OF LOCATION, GROWTH AND WELFARE WITH UNEQUAL POLLUTION EXPOSURES

2014 ◽  
Vol 19 (Supplement_1) ◽  
pp. S58-S82 ◽  
Author(s):  
Hoang Khac Lich ◽  
Frédéric Tournemaine
Keyword(s):  
Environmental Quality ◽  
Capital Accumulation ◽  
Main Idea ◽  
Human Capital Accumulation ◽  
Lower Growth ◽  
Endogenous Growth Model ◽  
The Impact ◽  
Geographical Locations ◽  
General Individuals

We develop an endogenous growth model with human capital accumulation in which firms are polluting and heterogeneous individuals must decide, among other things, where to live. The main idea is that pollution is unequally spread across geographical locations, inducing a trade-off for individuals between environmental quality and leisure. In such economy, we show that a better environmental quality and/or a greater degree of inequality lead individuals to favour cleaner locations which, in turn, boosts long-term growth. Welfare-wise, we find that, in general, individuals prefer a greater level of consumption and leisure but lower growth and environmental quality than those which are possible to achieve. Moreover, we show that the sign of the impact of inequality on environmental quality is likely to be negative.

scholarly journals ENVIRONMENTAL POLICY, EDUCATION AND GROWTH: A REAPPRAISAL WHEN LIFETIME IS FINITE

2011 ◽  
Vol 16 (5) ◽  
pp. 661-685 ◽  
Author(s):  
Xavier Pautrel
Keyword(s):  
Human Capital ◽  
Environmental Policy ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Monetary Economics ◽  
Physical Capital ◽  
Positive Influence ◽  
Overlapping Generations Model ◽  
Final Output ◽  
Source Of Pollution

When finite lifetime is introduced in a Lucas [Journal of Monetary Economics 22 (1988), 3–42] growth model where the source of pollution is physical capital, the environmental policy may enhance the growth rate of a market economy, whereas pollution does not influence educational activities, labor supply is not elastic, and human capital does not enter the utility function. The result arises from the generational turnover effect due to finite lifetime and it remains valid under conditions when the education sector uses final output as well as time to accumulate human capital. This article also demonstrates that ageing reduces the positive influence of environmental policy when growth is driven by human capital accumulation à la Lucas in the overlapping-generations model of Yaari [Review of Economic Studies 32 (1965), 137–150] and Blanchard [Journal of Political Economy 93 (1985), 223–247].

scholarly journals GROWTH AND KEEPING UP WITH THE JONESES

2010 ◽  
Vol 14 (S2) ◽  
pp. 176-199 ◽  
Author(s):  
Ronald Wendner
Keyword(s):  
Continuous Time ◽  
Overlapping Generations ◽  
Optimal Allocation ◽  
Overlapping Generations Model ◽  
Tax System ◽  
Balanced Growth ◽  
Lump Sum ◽  
Optimal Tax ◽  
The Impact ◽  
Total Wealth

This paper investigates the impact of the desire to keep up with the Joneses (KUJ) on economic growth and optimal tax policy in a continuous-time, overlapping-generations model with AK technology and exogenous, gradual retirement. Due to the desire to KUJ, the propensity to consume out of total wealth rises (declines), and the balanced growth rate declines (increases), when the households' individual total (physical and human) wealth is increasing (decreasing) with age. The rate of retirement determines whether or not a household's total wealth is increasing with age. If total wealth is increasing (decreasing) with age, an optimal allocation is decentralized by an intergenerationally progressive (regressive) lump-sum tax system. The desire to KUJ strengthens the intergenerational regressivity (progressivity) of the optimal tax system. The optimal tax implications of the desire to KUJ are a key finding of this paper.

scholarly journals AGING, THE GREAT MODERATION, AND BUSINESS-CYCLE VOLATILITY IN A LIFE-CYCLE MODEL

2016 ◽  
Vol 21 (2) ◽  
pp. 362-383 ◽  
Author(s):  
Burkhard Heer ◽  
Stefan Rohrbacher ◽  
Christian Scharrer
Keyword(s):  
Life Cycle ◽  
Labor Supply ◽  
Overlapping Generations ◽  
Empirical Studies ◽  
Output Volatility ◽  
Great Moderation ◽  
Overlapping Generations Model ◽  
Age Composition ◽  
The Impact ◽  
Shaped Pattern

According to empirical studies, the life cycle of labor supply volatility exhibits a U-shaped pattern. This may lead to the conclusion that demographic change induces a drop in output volatility. We present an overlapping-generations model that replicates the empirically observed pattern and study the impact of demographic transition on output volatility. We find that the change in age composition itself has only a marginal influence on output volatility, as the mitigating effect of more individuals with lower labor supply volatilities is compensated for by higher age-specific labor shares. Instead, the driving force behind the Great Moderation in our model is the downward shift of the age-specific labor supply volatility curve.

scholarly journals Complementary funded pensions and economic growth: Theoretical and empirical evidence using an overlapping generations model applied to the case of Tunisia

2021 ◽  
Vol 66 (231) ◽  
pp. 59-97
Author(s):  
Houyem Chekki Cherni
Keyword(s):  
Economic Growth ◽  
Computable General Equilibrium ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Pension Reform ◽  
Computable General Equilibrium Model ◽  
Pension Scheme ◽  
Overlapping Generations Model ◽  
Funded Pensions ◽  
Theoretical Results

This paper presents a prospective analysis to guide effective pension reform. Using an overlapping generations model with differing returns on free savings and compulsory returns on funded pensions, we put into perspective the results largely supported in the economic literature that assume that replacing a pay-as-you-go pension scheme by funded plans boosts economic growth. We show that this reform is not necessarily synonymous with economic growth due to a crowding-out effect. Our contribution is not limited to theoretical results: we also assess the impacts empirically. Thus, we extend the theoretical model to take into account several periods and 55 generations. Simulation results, using a dynamic overlapping generations computable general equilibrium model calibrated for the Tunisian case, indicate that whether pension reform promotes capital accumulation and economic growth depends on the rate of return on funded pension savings relative to free savings.

scholarly journals Stimulating annuity markets

2016 ◽  
Vol 16 (4) ◽  
pp. 554-583
Author(s):  
BEN J. HEIJDRA ◽  
JOCHEN O. MIERAU ◽  
TIMO TRIMBORN
Keyword(s):  
General Equilibrium ◽  
Capital Accumulation ◽  
Overlapping Generations ◽  
Partial Equilibrium ◽  
Human Capital Accumulation ◽  
Overlapping Generations Model ◽  
Long Run ◽  
State Agents ◽  
Annuity Markets ◽  
Stimulation Of

AbstractWe study the short-, medium-, and long-run implications of stimulating annuity markets in a dynamic general-equilibrium overlapping-generations model. We find that beneficial partial-equilibrium effects of stimulating annuity markets are counteracted by negative general-equilibrium repercussions. Balancing the positive partial-equilibrium and negative general-equilibrium forces we show that there exists an intermediate level of annuitization such that the lifetime utility of steady-state agents is maximized. Studying the transition to this optimal degree of annuitization shows that currently middle-aged individuals stand to gain most from the stimulation of annuity markets. Complementing our main analysis, we highlight the centrality of the interplay between human-capital accumulation and annuity market policy.

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