Seminario 16/14: – Mª Pilar Martínez García (U. Murcia)- Policy implications of non-constant discounting in an endogenous growth model with pollution abatement

Información

Abstract:

We analyze the effect of non-constant discounting on the sustainability of economic growth in a model with pollution and abatement. A balanced path equilibrium with decreasing pollution exists under plausible assumptions considering time-consistent agents. Compared to exponential discounting, the social optimum when consumers discount a non-constant rate shows greater abatement and consumption expenditure shares and lower economic growth. In the market equilibrium the abatement share is independent of the discounting method, unlike the growth rate of the economy. Finally, the environmental policies approaching the market equilibrium towards the social optimum are less effective when consumers discount at a decreasing rate.