Thresholds and Multiple Equilibria for Growth and Climate Change
WORKING PAPER
In this working paper, the authors analyze a basic growth model where they allow for global warming.
As concerns global warming, they assume that the climate system is characterized by feedback effects such that the ability of the earth to emit radiation to space is reduced as the global surface temperature rises. They first study the model assuming that abatement spending is fixed exogenously and demonstrate with the use of numerical examples that the augmented model may give rise to multiple equilibria and thresholds. Then, they analyze the social optimum where both consumption and abatement are set optimally and shoe that the long-run equilibrium is unique in this case.