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A stylised macroeconomic model incorporating green capital in the framework of Viability Theory

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  • Driscoll O'Keefe, Maximilien

Abstract

New Zealand’s Treasury, as illustrated by its Living Standards Framework, desires policy that not only promotes economic growth, but also sustainability and equity. This paper studies how taxation and abatement policy can work to keep an economy viable in regards to capital stocks, consumption, debt, environment and the relative factor share (a proxy for income inequality), as well as the trade-offs it faces in different levels of pollutant industry. This is done in the context of Viability Theory, a branch of mathematics suited for policy analysis. The results show that reducing an economies environmental impact is key for achieving the multi faceted growth laid out in the Living Standards Framework.

Suggested Citation

  • Driscoll O'Keefe, Maximilien, 2016. "A stylised macroeconomic model incorporating green capital in the framework of Viability Theory," MPRA Paper 75405, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75405
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    References listed on IDEAS

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    1. Daron Acemoglu & Philippe Aghion & Leonardo Bursztyn & David Hemous, 2012. "The Environment and Directed Technical Change," American Economic Review, American Economic Association, vol. 102(1), pages 131-166, February.
    2. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "New Zealand inequality and the struggle between capital and labour," Working Paper Series 4156, Victoria University of Wellington, School of Economics and Finance.
    3. Arrow, Kenneth J. & Dasgupta, Partha & Goulder, Lawrence H. & Mumford, Kevin J. & Oleson, Kirsten, 2012. "Sustainability and the measurement of wealth," Environment and Development Economics, Cambridge University Press, vol. 17(3), pages 317-353, June.
    4. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    5. Chichilnisky, Graciela & Heal, Geoffrey & Beltratti, Andrea, 1995. "The Green Golden Rule," Economics Letters, Elsevier, vol. 49(2), pages 175-179, August.
    6. Girol Karacaoglu, 2015. "The New Zealand Treasury's Living Standards Framework - Exploring a Stylised Model," Treasury Working Paper Series 15/12, New Zealand Treasury.
    7. O'Keefe, Maximilien D. & Krawczyk, Jacek B., 2016. "Viability of an economy with constrained inequality in a two tax system," Working Paper Series 4995, Victoria University of Wellington, School of Economics and Finance.
    8. Krawczyk, Jacek B & Pharo, Alastair S, 2014. "Manual of VIKAASA 2.0: An application for computing and graphing viability kernels for simple viability problems," Working Paper Series 3432, Victoria University of Wellington, School of Economics and Finance.
    9. Krawczyk, Jacek B & Townsend, Wilbur, 2015. "Viability of an economy with constrained inequality," Working Paper Series 4689, Victoria University of Wellington, School of Economics and Finance.
    10. Krawczyk, Jacek B. & Judd, Kenneth L., 2014. "Which economic states are sustainable under a slightly constrained tax-rate adjustment policy," MPRA Paper 59027, University Library of Munich, Germany.
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    More about this item

    Keywords

    factor income; inequality; green capital; viability theory; capital income tax; labour income tax; environment;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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