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Intergenerational Conflicts and the Resource Policy Formation of a Short-Lived Government

Author

Listed:
  • Uk Hwang

    (University of Cambridge)

  • Francesco Magris

    (EPEE, Université d'Evry Val d'Essonne)

Abstract
This paper studies the political economy of resource management in an OLG framework with an intertemporal externality problem. The externality arises because a common resource used for production is depleted by production of dirty goods. An intergenerational conflict arises because the young generation cares about the level of current production of dirty goods. This is so because production of dirty goods affects the future availability of the resource. The old, on the other hand, has no such a concern. We assume that they lobby the government to affect the policy choice - an upper limit on the resource use allowed for production of dirty goods - in their favour. Within a dynamic common agency framework, we study stationary equilibria focussing on a particular class of strategies which we called "Take It or Leave It" (TIOLI) strategies, where a lobby makes a positive contribution only when her payoff maximising pol- icy is implemented. It is shown that political competition may lead to a "greener" environment policy and to less resource exploitation than in an unregulated economy. More surprisingly, we also find that resource ex- ploitation may be lower in political equilibrium than in an economy run by a social planner.

Suggested Citation

  • Uk Hwang & Francesco Magris, 2004. "Intergenerational Conflicts and the Resource Policy Formation of a Short-Lived Government," Documents de recherche 04-16, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    • Handle: RePEc:eve:wpaper:04-16
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    dynamic common agency; effciency; externalities; political competition; resource policy design;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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