Life-Cycle of Goods and Intergenerational Externalities

  • Jean De Beir, Mouez Fodhay, Guillaume Girmensz
  • Published 2012

Abstract

This paper analyses recycling optimal policy in a general equilibrium model with intergenerational environmental externalities. We consider a generalized life-cycle framework: households live two periods (young and old) and goods live two periods (virgin and recycled). First, we show that the life-cycle assumption for agents and goods requires a de…nition of a green modi…ed golden rule suitable for intergenerational externalities and recycling problems. Indeed, as recycling decreases waste pollution in the future, it acts as an incentive to increase consumption and waste in the present. Secondly, we show that the recycling sector is a tool for sustainable development. Indeed, if the recycling technology is e¢ cient enough, recycling activities o¤set the environmental externalities. In this case, the optimal level of the Pigovian tax rate on pollution is zero.

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Cite this paper

@inproceedings{Beir2012LifeCycleOG, title={Life-Cycle of Goods and Intergenerational Externalities}, author={Jean De Beir and Mouez Fodhay and Guillaume Girmensz}, year={2012} }