Intergenerational Altruism and the Environment

TLDR

The study builds an overlapping‑generations model of pollution externality that incorporates intergenerational altruism to examine how altruistic preferences affect consumption and welfare. An overlapping‑generations framework with altruistic parent‑offspring links is used to analyze pollution externality. Higher intergenerational altruism can lower steady‑state consumption, and the competitive equilibrium remains suboptimal despite altruistic preferences. JEL classification: D62, D64, D91.

Abstract

We construct an overlapping generations model of pollution externality in which individuals are altruistically linked to their offspring as in Barro (1974). It is shown that steady‐state consumption may be a decreasing function of the intergenerational degree of altruism. Despite individuals' altruism, the competitive equilibrium is not optimal. We thus study the social optimum and show that it can be decentralized. JEL classification: D 62; D 64; D 91