Trading Off Generations: Infinitely-Lived Agent Versus OLG

Maik Schneider, Christian Traeger and Ralph Winkler

No 10/128, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: The prevailing literature discusses intergenerational trade-offs predominantly in infinitely-lived agent models despite the finite lifetime of individuals. We discuss these trade-offs in a continuous time OLG framework and relate the results to the infinitely-lived agent setting. We identify three shortcomings of the latter: First, underlying normative assumptions about social preferences cannot be deduced unambiguously. Second, the distribution among generations living at the same time cannot be captured. Third, the optimal solution may not be implementable in overlapping generations market economies. Regarding the recent debate on climate change, we conclude that it is indispensable to explicitly consider the generations' life cycles.

Keywords: climate change; discounting; infinitely-lived agents; intergenerational equity; overlapping generations; time preference (search for similar items in EconPapers)
JEL-codes: D63 H23 Q54 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2010-03
New Economics Papers: this item is included in nep-dge and nep-env
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Trading Off Generations: Infinitely Lived Agent Versus OLG (2012)
Working Paper: Trading Off Generations: Infinitely Lived Agent Versus OLG (2012)
Working Paper: Trading Off Generations: Infinitely-Lived Agent Versus OLG (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:10-128

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