Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis

35 Pages Posted: 24 Sep 2007

See all articles by Craig A. Bond

Craig A. Bond

Colorado State University, Fort Collins - Department of Agriculture and Resource Economics

Y. Hossein Farzin

University of California, Davis - Department of Agricultural and Resource Economics; Oxford Centre for the Analysis of Resource Rich Economies (OxCarre)

Date Written: 2007

Abstract

Using the numerical technique of value iteration, this paper imposes several sustainability constraints on a simple multi-sector agroecosystem model, and provides analysis of the costs tradeoffs of the product and externality affected sectors both within and between generations. Results show that internalization of a stock externality is insufficient for intergenerationally equitable welfare paths, while sustaining a physical resource over time in the interests of equitability can result in a less equitable distribution of welfare across generations. Furthermore, a value sustainability constraint imposed on the social welfare maximization problem acts as a welfare transfer mechanism from the productive sector to the sector affected by the externality, but implies growth in profits for the productive sector and declining utility for the non-productive sector.

Keywords: Intergenerational equity, social welfare, stock externality, sustainability criteria, Chebychev polynomial, constrained dynamic optimization

JEL Classification: Q56, Q52, Q53, Q24, D62

Suggested Citation

Bond, Craig A. and Farzin, Y. Hossein, Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis (2007). Available at SSRN: https://ssrn.com/abstract=1016481 or http://dx.doi.org/10.2139/ssrn.1016481

Craig A. Bond

Colorado State University, Fort Collins - Department of Agriculture and Resource Economics ( email )

Fort Collins, CO 80523
United States

Y. Hossein Farzin (Contact Author)

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-7610 (Phone)
530-752-5614 (Fax)

HOME PAGE: http://farzin.ucdavis.edu/

Oxford Centre for the Analysis of Resource Rich Economies (OxCarre) ( email )

University of Oxford, Department of Economics
Manor Road
Oxford, OX1 4AU
United Kingdom

HOME PAGE: http://www.oxcarre.ox.ac.uk

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