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Provision of a Public Good with Multiple Dynasties

Authors


  • An earlier version of this article was entitled ‘Provision of a public good with altruistic overlapping generations and many tribes’. The various versions benefited from comments by Geir Asheim, Ivar Ekeland, Reyer Gerlagh, Bard Harstad, Antii Iho, Terry Iverson, Jacek Krawczyk, Derek Lemoine, Armon Rezai, John Roemer, Leo Simon, Christian Traeger, seminar participants at Berkeley, Santa Barbara, Paris, Vienna, SURED 2012 and the TIGER conference, Toulouse 2013, two anonymous referees and an Editor (who suggested a way of simplifying the proof of Proposition ). The usual disclaimer holds.

Abstract

Because carbon emissions create externalities across countries and generations, climate policy requires international cooperation and intergenerational altruism. A differential game using overlapping generations with intergenerational altruism shows how altruism and cooperation interact, and provides estimates of their relative importance in determining equilibrium steady-state carbon levels. A small increase in cooperation has a larger equilibrium effect than a small increase in altruism, beginning at empirically plausible levels. A large increase in altruism may have a larger equilibrium effect, compared to a large increase in cooperation. Climate investments may be dynamic strategic complements, reducing but not eliminating incentives to free ride.

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