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Endogenous aspirations, growth and the rise of environmental concerns

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  • Bouché, Stéphane
  • de Miguel, Carlos

Abstract

In this paper, we analyze the implications of assuming that the intensity of aspirations is endogenous. In accordance with empirical evidence, consumption aspirations decrease with capital accumulation while environmental ones increase. We show that such a change in the intensity of aspirations gives rise to a U-shaped relationship between capital accumulation and environmental quality. We also study the implications of our assumption concerning the optimal allocation and show that the steady-state capital stock can be larger or smaller than the one corresponding to the modified golden rule. In addition, for realistic parameter values, the decentralization of the optimal allocation requires the implementation of a maintenance investment subsidy and a lump-sum transfer from the old to the young generation.

Suggested Citation

  • Bouché, Stéphane & de Miguel, Carlos, 2019. "Endogenous aspirations, growth and the rise of environmental concerns," Energy Economics, Elsevier, vol. 84(S1).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:s1:s0140988319303214
    DOI: 10.1016/j.eneco.2019.104526
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    1. de Miguel, Carlos & Filippini, Massimo & Labandeira, Xavier & Labeaga, José M. & Löschel, Andreas, 2019. "Low-carbon Transitions: Economics and Policy," Energy Economics, Elsevier, vol. 84(S1).

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    More about this item

    Keywords

    Overlapping generations; Endogenous aspirations; Environmental quality;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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