|The course extends the classic growth model in which the consumption-savings decision reflects the trade-off between present and future consumption, to include resource exploitation and conservation, fertility, endogenous technology. The course explores methods used to study longer horizons. We mention here four potential topics: (i) efficient fertility policy, (ii) common but regionally differentiated responsibility for global resource conservation (iii) green growth and endogenous technology, (iv) environmental policy as risk management.|
Fertility. Should global climate policy focus lower emissions per income, lower income per capita, or lower population numbers? Birth control as part of climate policy receives increasing attention, but remains a politically sensitive topic. We study models that analyze the `birth externality¿ in the context of climate change.
Differentiated responsibilities. Recent application of macro methods to climate change has brought suggestions for a global carbon tax rule: a simple formula for the carbon price that internalizes future climate change damages. We consider the literature that calls for a carbon tax rule diversified over countries, based on historic responsibility and current income.
Green growth. Green growth refers to the possibilities for the economy to substitute accumulated knowledge for declining resource stocks. We start with the Dasgupta-Heal-Solow-Stiglitz (DHSS) model, and continue with recent developments that merge the DHSS model with endogenous growth. These models search for the conditions, mostly in terms of technology, under which continued growth is possible in a world bound by physical constraints.
Environment and risk. Macro economics has a rich toolbox to study both idiosyncratic and aggregate risks. Here we apply these toolbox to consider whether environmental policies can reduce risks.
Type of instructions3 hours interactive lecture, 5 weeks
Type of exams100% take home exam
- Readings depend on the topics chosen by the students. Here we list a few.
- Dasgupta P.S. and Heal G.M., The optimal depletion of exhaustible resources, Review of Economic Studies 41: 3-28, 1974.
- Nordhaus, Optimal greenhouse-gas reductions and tax policy in the" DICE" model, AER, 1993.
- Harford JD, The ultimate externality, AER 88: 260-265, 1998.
- Goulder, Parry, Williams III, Burtraw, The cost-effectiveness of alternative instruments for environmental protection in a second-best setting, JPubE, 1999.
- Sinn H.W., Public policies against global warming: a supply side approach, International tax and public finance 15: 360-394, 2008.
- Gollier, Ecological discounting, JET, 2010.
- Acemoglu, Aghion, Bursztyn, HemousAcemoglu, Aghion, Bursztyn, Hemous, The environment and directed technical change, AER, 2012.
- Golosov, Hassler, Krusell, Optimal taxes on fossil fuel in general equilibrium, Econometrica, 2014.
- Jensen and Traeger, Optimal climate change mitigation under long-term growth uncertainty: Stochastic integrated assessment and analytic findings, EER, 2014.
- Bohn and Stuart, Calculation of a population externality, AEJ-Policy 7: 61-87, 2015.