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Trading Off Generations: Equity, Discounting, and Climate Change

42 Pages Posted: 31 Aug 2012  

Maik T. Schneider

University of Bath

Christian P. Traeger

University of California, Berkeley

Ralph Winkler

University of Bern - Department of Economics; University of Bern - Oeschger Centre for Climate Change Research

Date Written: August 30, 2012

Abstract

The prevailing literature discusses intergenerational trade-offs in climate change predominantly in terms of the Ramsey equation relying on the infinitely lived agent model. We discuss these trade-offs in a continuous time OLG framework and relate our results to the infinitely lived agent setting. We identify three shortcomings of the latter: First, underlying normative assumptions about social preferences cannot be deduced unambiguously. Second, the distribution among generations living at the same time cannot be captured. Third, the optimal solution may not be implementable in overlapping generations market economies.

Keywords: climate change, discounting, infinitely lived agents, intergenerational equity, overlapping generations, time preference

JEL Classification: D63, H23, Q54

Suggested Citation

Schneider, Maik T. and Traeger, Christian P. and Winkler, Ralph, Trading Off Generations: Equity, Discounting, and Climate Change (August 30, 2012). European Economic Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2138744

Maik T. Schneider

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Christian P. Traeger

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Ralph Winkler (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, 3001
Switzerland
+41 31 631 4508 (Phone)

HOME PAGE: http://www.ralph-winkler.de

University of Bern - Oeschger Centre for Climate Change Research ( email )

Zähringerstrasse 25
Bern, 3012
Switzerland

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