Paper #1110

Title:

A dynamic analysis of human welfare in a warming planet

Authors:

Humberto Llavador, John E. Roemer and Joaquim Silvestre

Date:

September 2008 (Revised: February 2010)

Abstract:

Climate science indicates that climate stabilization requires low GHG emissions. Is this consistent with nondecreasing human welfare? Our welfare or utility index emphasizes education, knowledge, and the environment. We construct and calibrate a multigenerational model with intertemporal links provided by education, physical capital, knowledge and the environment. We reject discounted utilitarianism and adopt, first, the Pure Sustainability Optimization (or Intergenerational Maximin) criterion, and, second, the Sustainable Growth Optimization criterion, that maximizes the utility of the first generation subject to a given future rate of growth. We apply these criteria to our calibrated model via a novel algorithm inspired by the turnpike property. The computed paths yield levels of utility higher than the level at reference year 2000 for all generations. They require the doubling of the fraction of labor resources devoted to the creation of knowledge relative to the reference level, whereas the fractions of labor allocated to consumption and leisure are similar to the reference ones. On the other hand, higher growth rates require substantial increases in the fraction of labor devoted to education, together with moderate increases in the fractions of labor devoted to knowledge and the investment in physical capital.

Keywords:

Climate change, education, Maximin, growth.

JEL codes:

D63, O40, O41, Q50, Q54, Q56

Area of Research:

Microeconomics / Labour, Public, Development and Health Economics

Published in:

Journal of Public Economics, 95(11-12), 1607-1620, 2011

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