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Growth, Pollution and Money-Metric Welfare in Imperfect Markets
Uppsala University - Department of Economics.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2012 (English)Report (Refereed)
Abstract [en]

This paper shows how utility-based welfare measures in dynamic general equilibrium under imperfect markets can be transferred into a money metrics. In order to do this, we need to price forward looking components measured in units of utility. The typical comprehensive (green or inclusive) quasi-static welfare measure contains a core that looks like a comprehensive NNP component, as well as additional consumer surplus terms for both consumption goods and the externality. In addition, it contains a forward looking component with the discounted value of the marginal externality as a function to be integrated over time. To accomplish this, we need a price index that is independent of the market basket, or to assume that the marginal utility of income is constant over time. With respect to local welfare measures it turns out that growth in traditional NNP will surprisingly work, provided that we condition on a positive average marginal rate of return of investment, and use an augmented genuine saving concept.

Place, publisher, year, edition, pages
Social Science Electronic Publishing, Inc , 2012. no 4, 20 p.
, CERE Working Paper, 2012:15
National Category
URN: urn:nbn:se:umu:diva-60158DOI: 10.2139/ssrn.2153615OAI: diva2:558326
Available from: 2012-10-02 Created: 2012-10-02 Last updated: 2013-06-11Bibliographically approved

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Löfgren, Karl-Gustaf
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