Publication Type

Journal Article

Version

Postprint

Publication Date

7-2008

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. (C) 2008 Elsevier Inc. All rights reserved.

Keywords

non-constant pure rate of time preference, hyperbolic discounting, numerical methods, non-renewable resources, observational equivalence, climate change, Stern Review

Discipline

Environmental Sciences | Environmental Studies | Public Economics

Research Areas

Applied Microeconomics

Publication

Journal of Environmental Economics and Management

Volume

56

Issue

1

First Page

83

Last Page

101

ISSN

0095-0696

Identifier

10.1016/j.jeem.2007.11.004

Publisher

Elsevier

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

https://doi.org/10.1016/j.jeem.2007.11.004

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