Suchergebnisse

This paper explores how a principal with time-inconsistent preferences invests optimally in technology or capital. If the current principal prefers her future self to save more, she can increase current investments complementary to future savings and decrease investments in the strategic substitutes, for example. To characterize the principalś choices they are compared to a market equilibrium where the investors are private agents. Each investing agent applies the same discount factors as do the principal and he obtains full property rights to the future returns. With geometric discounting, there would be no need to regulate (subsidize/tax) these agents. With time-inconsistent preferences, however, the current principal benefits from subsidizing investments in "green" capital (complementary to future savings) and tax investments in substitute capital such as "brown" technology and even adaptation technology. The paper can thus compare policies for different types of investments at the same level in the production hierarchy, but investments at different levels are also compared. With quasi-hyperbolic discounting, the optimal subsidy is unrelated to this level. With discount rates that are strictly decreasing in relative time, however, upstream investments (needed for downstream investments) will optimally be subsidized at a higher rate. When applied to environmental policy, the paper provides a new rationale for subsidizing green (and taxing brown) technology unrelated to the traditional motivation emphasizing public good aspects.

AbstractA tractable dynamic model of international climate policies is analysed. The choice of bargaining game influences participation levels, emission quotas and technology investment levels. I derive several predictions that are arguably consistent with the differences between the 1997 Kyoto Protocol and the 2015 Paris Agreement—including the transitioning from the former to the latter.

Can trade agreements motivate environmental conservation? I first present a model whereby the government in the South expands its production capacity (e.g., deforest) before trading with the North. After deriving negative relationships between tariff reductions and conservation, I show how all negative results are reversed if countries can negotiate a contingent trade agreement (CTA), where default tariffs vary with changes in the production capacity (or forest cover). A calibration suggests that growth and liberalization can cause Brazil's agricultural area to expand by 27%, but this expansion can be avoided if the EU and the US offer a CTA.

Every government that controls an exhaustible resource must decide whether to exploit it or to conserve and thereby let the subsequent government decide whether to exploit or conserve. This paper develops a theory of this situation and shows when a small probability that some future government will exploit a resource leads to a domino effect with rapid exploitation. This effect leads to a multiplier that measures how a small change in parameters can have large effects. The multiplier is especially large if the government is powerful now but unlikely to be in power later. The multiplier also permits dramatic returns on lobby contributions contingent on exploitation -- or on compensations contingent on conservation -- when these offers are expected to continue. To best take advantage of the multiplier, I show how and when compensations should be offered to the president, the party in power, the general public, or to the lobby group.