Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144547
Authors: 
Quaas, Martin F.
Bröcker, Johannes
Year of Publication: 
2016
Series/Report no.: 
Economics Working Paper, Christian-Albrechts-Universität Kiel, Department of Economics 2016-09
Abstract: 
We develop an overlapping generations endogenous growth model with stocks of produced capital, human capital, a non-renewable resource, and irreversibly accumulated greenhouse gases in deterministic and stochastic versions. The model allows for analyzing different elasticities of substitution. We present a full analytical solution and characterization of the transition dynamics. We show that, as a rule of thumb, the social cost of carbon grow at a rate equal to the economy's growth rate divided by the elasticity of substitution. We analytically study sensitivity of the social cost of carbon with respect to key parameters: the intergenerational discount rate, the elasticity of substitution, and climate uncertainty. We show that the social cost of carbon explode at a finite level of log-normally distributed climate uncertainty. We illustrate results in a calibrated version of the model.
Subjects: 
overlapping generations
substitutes vs. complements
stochastic resource dynamics
optimum growth
climate policy
JEL: 
Q54
O44
Q32
Document Type: 
Working Paper

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