INTERNATIONAL AND INTERGENERATIONAL ENVIRONMENTAL EXTERNALITIES

We examine a world in which policymakers' actions in a given country a t a given time have long-lived effects on a common resource: the globa l environment. We consider the first best in which long-lived planners behave cooperatively, then examine the allocation of resources when t here is non-cooperation across countries, across time, or both. Finall y we analyze the dynamic behavior of the economy along balanced growth paths. It is found that while long-lived international institutions a re necessary to internalize all externalities, cooperation at a point in time may be harmful to future generations.