Decisions that affect environmental quality both influence and respond to macroeconomic variables. Further, many environmental and macroeconomic consequences of current actions will have uncompensated effects that outlive the actors. This project will develop and analyze macroeconomic models exhibiting intergenerational environmental externalities. The models proposed utilize the overlapping-generations framework, since this is a simple and natural demographic structure for macroeconomic analyses of intergenerational concerns. The project, among other things, will contribute to the "new growth theory", since it integrates environmental externalities with models of capital accumulation under external, increasing returns. The aims of the research are three fold The first goal is to analyze the properties of overlapping-generations models with intergenerational externalities. Second, the models developed will be used to investigate the role of macroeconomic policy in ameliorating environmental problems. Finally, variants of the models will be developed that permit detailed consideration of specific environmental concerns, such as recycling and availability of landfill space. This research is important because it will enhance our understanding of the interaction of economic growth and environmental issues.
