This paper innovates the literature on endogenous discounting in environmental economics, by studying the global properties of the equilibrium outside the small neighborhood of the steady state. The internalization of individual con-sumption in the social discount rate is rich of powerful consequences from the economic point of view, for it leads to a qualitative change in the steady state and its transitional dynamics, so that the perfect foresight equilibrium may not be unique, and thus both local and global indeterminacy can eventually emerge. The main implication for decision making is that if indeterminacy occurs, public policies become not sufficient to drive the economy towards the long-run equilib-rium. In particular, we show that the onset of parametric restrictions for which both global indeterminacy in the full ℝ³ vector field, and a quasi-periodic dynamics with trajectories wrapped around an invariant torus, may eventually emerge.

Endogenous Discounting and Global Indeterminacy

BELLA, GIOVANNI
2013-01-01

Abstract

This paper innovates the literature on endogenous discounting in environmental economics, by studying the global properties of the equilibrium outside the small neighborhood of the steady state. The internalization of individual con-sumption in the social discount rate is rich of powerful consequences from the economic point of view, for it leads to a qualitative change in the steady state and its transitional dynamics, so that the perfect foresight equilibrium may not be unique, and thus both local and global indeterminacy can eventually emerge. The main implication for decision making is that if indeterminacy occurs, public policies become not sufficient to drive the economy towards the long-run equilib-rium. In particular, we show that the onset of parametric restrictions for which both global indeterminacy in the full ℝ³ vector field, and a quasi-periodic dynamics with trajectories wrapped around an invariant torus, may eventually emerge.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11584/95589
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