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Growth With Many Agents and Wages Paid Ex Ante
In this paper, we consider a one-sector model of economic growth with several infinitely-lived heterogeneous agents, who are endowed with diverse discount factors as well as preferences over consumption. In line with the classical Ramsey model, agents are not allowed to borrow against future income. Unlike the traditional assumption of ex post wage payment, wages are paid ex ante in our model. We first explain the difference between the assumptions of wages being paid ex ante and wages being paid ex post in the framework of a simple illustrative two-class model. Our main result shows that in contrast to the many-agent Ramsey model with ex post wage payment, the capital stock sequence converges to the steady state stock irrespective of production technology employed by the firms. Further, all impatient agents own zero capital stock, whereas the most patient agent owns the entire capital stock from some time onward. Thus, we have shown that a slight modification in the timing of wage payment in growth models can lead to significant changes in the stability properties of equilibrium dynamics.
Common and Private Property to Exhaustible Resources
We develop two models of economic growth with exhaustible natural resources and consumers heterogeneous in time preferences. The first model assumes private ownership of natural resources. In the second model, natural resources are commonly owned and the resource extraction rate is chosen by voting. We show that if discount factors are given exogenously, the long-run rate of growth under private property is higher than or equal to that under common property. If the discount factors are formed endogenously, under some circumstances common property can result in a higher rate of growth than private property.
Carbon Pricing, Technology Transition, and Skill-Based Development
We analyze the impact of carbon prices on human capital accumulation, sectoral change, and economic growth. In our framework output is produced with dirty and/or clean technologies using skilled and unskilled labor as inputs. Carbon policy affects technology selection which transmits incentives for human capital formation. We show that a temporary policy may be sufficient for a transition to a clean economy and that such a policy also stimulates economic growth. Moreover, in the presence of inter-country knowledge spillovers, a carbon policy in the North helps human capital formation in the South and induces South's transition to the clean steady state.
A Characterization of Ramsey Equilibrium in a Model with Limited Borrowing
This paper considers a one-sector economic growth model with several infinitely - lived heterogeneous households, who differ both in the discount factors as well as preferences over consumption. Unlike the extreme form of borrowing constraint observed in the classical Ramsey model, recently surveyed in Becker (2006), we allow limited borrowing by the households and prove the existence of a perfect foresight equilibrium. We also show that irrespective of production technology employed by the firms, the capital stock sequence converges to the steady state stock and from some time onward all impatient households are in the maximum borrowing state, whereas the most patient household owns entire capital stock and the debts of all other households.
Dynamic Optimization in Environmental Economics
The book presents new developments in the dynamic modeling and optimization methods in environmental economics and provides a huge range of applications dealing with the economics of natural resources, the impacts of climate change and of environmental pollution, and respective policy measures. The interrelationship between economic activities and environmental quality, the development of cleaner technologies, the switch from fossil to renewable resources and the proper use of policy instruments play an important role along the path towards a sustainable future. Biological, physical and economic processes are naturally involved in the subject, and postulate the main modelling, simulation and decision-making tools: the methods of dynamic optimization and dynamic games.
Optimal Carbon Policies in a Dynamic Heterogenous World
We derive the optimal contributions to global climate policy when countries differ with respect to income level and pollution intensity. Countries growth rates are determined endogenously, and abatement efficiency is improved by technical progress. We show that country heterogeneity has a crucial impact on optimal policy contributions: more developed countries have to make a larger effort while less developed countries are allowed to graduate under a less stringent environmental regime. The optimal allocation of pollution permits depends on international trade. In the absence of international permit trade, more developed countries should receive more permits than the less developed countries but permit prices are higher in the rich countries. With international permit trade, more developed countries receive less permits than the less developed. When global distribution of physical capital is uneven and the aggregate pollution ceiling is low, poor countries receive all the permits and incomes do not converge, even with free trade.
