Title

Numerical Analysis of Non-Constant Pure Rate of Time Preference: A Model of Climate Policy

Publication Type

Book Chapter

Publication Date

2010

Abstract

When current decisions affect welfare in the far-distant future, as with climate change, the use of a declining pure rate of time preference (PRTP) provides potentially important modeling flexibility. The difficulty of analyzing models with non-constant PRTP limits their application. We describe and provide software (available online) to implement an algorithm to numerically obtain a Markov perfect equilibrium for an optimal control problem with non-constant PRTP. We apply this software to a simplified version of the numerical climate change model used in the Stern Review. For our calibration, the policy recommendations are less sensitive to the PRTP than widely believed.

Keywords

Non-constant pure rate of time preference; Hyperbolic discounting; Numerical methods; Non-renewable resources; Observational equivalence; Climate change; Stern Review

Discipline

Econometrics | Environmental Sciences | Statistics and Probability

Research Areas

Econometrics

Publication

The Economics of Climate Change

Volume

56

Issue

1

First Page

83

Last Page

101

ISBN

9781847207678

Publisher

Edward Elgar

City or Country

Cheltenham, UK

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://worldcat.org/isbn/9781847207678

Comments

edited by G.Chichilnsky. Edward Elgar (Reprint)

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