NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Asset Pricing Implications of Macroeconomic Interventions An Application to Climate Policy

Rajnish Mehra

NBER Working Paper No. 19146
Issued in June 2013
NBER Program(s):Asset Pricing, Corporate Finance, Environment and Energy Economics, Economic Fluctuations and Growth

This paper illustrates that evaluating alternate abatement polices that affect the growth path of an economy on the basis of their effects on asset valuation may not be welfare enhancing. We show that the class of abatement polices considered in the integrated assessment literature are robust with respect to the choice of a discount factor if lifetime consumption equivalents are used as a metric. We argue against a global welfare function in the presence of significant global household heterogeneity. While economic analysis is a useful tool for evaluating different policies for a homogenous class of households, inter household comparisons are an ethical issue.

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Document Object Identifier (DOI): 10.3386/w19146

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