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Capital Malleability and the Macroeconomic Costs of Climate Policy

Elisa Lanzi

Fondazione ENI Enrico Mattei (FEEM)

Ian Sue Wing

Boston University

March 11, 2010

FEEM Working Paper No. 19.2010

This paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital. When capital is imperfectly malleable a carbon policy is less effective than under the assumption of perfect malleability of capital. Therefore, it is important that, especially for the analysis of short-term environmental regulations, the issue of capital malleability is taken into consideration.

Number of Pages in PDF File: 47

Keywords: General Equilibrium, CGE Models, Climate Change Policy

JEL Classification: C68, D58, H22, Q43

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Date posted: March 13, 2010  

Suggested Citation

Lanzi, Elisa and Sue Wing, Ian, Capital Malleability and the Macroeconomic Costs of Climate Policy (March 11, 2010). FEEM Working Paper No. 19.2010. Available at SSRN: https://ssrn.com/abstract=1568764 or http://dx.doi.org/10.2139/ssrn.1568764

Contact Information

Elisa Lanzi (Contact Author)
Fondazione ENI Enrico Mattei (FEEM) ( email )
Campo S. M. Formosa, Castello 5252
Venezia, 30122
+39 0412711470 (Phone)
HOME PAGE: http://www.feem.it
Ian Sue Wing
Boston University ( email )
United States
Feedback to SSRN

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