Global Warming and the Population Externality

We calculate the harm a birth imposes on others when greenhouse gas emissions are a problem and a cap limits emissions damage. This negative population externality, which equals the corrective Pigovian tax on having a child, is substantial in calibrations. In our base case, the Pigovian tax is 21 percent of a parent’s lifetime income in steady state and 5 percent of lifetime income immediately after imposition of a cap, per child. The optimal population in steady state, which maximizes utility taking account of the externality, is about one quarter of the population households would choose voluntarily. Bohn: Department of Economics, University of California at Santa Barbara, Santa Barbara, CA 93106, [email protected]. Stuart: Department of Economics, University of California at Santa Barbara, Santa Barbara, CA 93106, [email protected]. We thank Ted Bergstrom, Javier Birchenall, Liming Chen, Ingemar Hansson, Espen Henriksen, Charles Kolstad, Jodi McMillen, and seminar participants at Georgetown University, Lund University, the Norwegian School of Economics and Business Administration (Bergen), and UCSB.