Abstract

We contrast private and public ownership of environment in their ability to internalize the negative externality associated to the urge of the environ ment in the production process. This paper constructs a dynamic general equilibri um model with overlapping generations and property rights on environmental assets. When environmental assets are privately owned, the long run social optimum can not be decentralized. When they are publicly owned, it can be decentralized by means of lump sum transfers between generations.

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