Capital Malleability and the Macroeconomic Costs of Climate Policy

This paper argues for introducing the role of capital malleability into the analysis of environmental policies. The issue is explored by means of a theoretical model, a numerical analysis and a computable general equilibrium (CGE) model. Considering the three approaches together is fundamental in obtaining theory-compatible policy-relevant results. The model outcomes reveal differences between results under separate assumptions regarding the malleability of capital. When capital is imperfectly malleable a carbon policy is less effective than under the assumption of perfect malleability of capital. Therefore, it is important that, especially for the analysis of short-term environmental regulations, the issue of capital malleability is taken into consideration.


Issue Date:
2010-02
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/59476
PURL Identifier:
http://purl.umn.edu/59476
Total Pages:
47
JEL Codes:
C68; D58; H22; Q43
Series Statement:
SD
19.2010




 Record created 2017-04-01, last modified 2018-01-22

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