Calculation of a Population Externality

Henning Bohn, Charles Stuart
2015 American Economic Journal: Economic Policy  
Harford (1998) shows that when people generate negative externalities, then a birth also generates a negative externality and efficiency requires Pigovian taxes on having children. We calculate the size of this population externality in a specific case. We consider the possibility that greenhouse gas emissions are a serious problem and assume government reacts by restricting emissions. This converts the population externality to a form that can be evaluated from existing data. The calibrated
more » ... ulation externality is large. In our base case, it is 21 percent of a parent's lifetime income in steady state (about $10,000/year for 30 years) and 5 percent of lifetime income immediately after imposition of emission restrictions, per child. It is higher in other plausible cases.
doi:10.1257/pol.20130012 fatcat:vkrz26eh4vfvnat7k6xtn5zway