| Abstract: | The emission of long-lived pollutants and public debt policies are related by the joint problem of intergenerational externalities. This paper examines both phenomena from the local perspective, in a model with interregional household mobility. We conclude that local environmental agencies have incentives to internalize all intergenerational pollution externalities, provided all rents of immobile production factors, including waste emissions, are appropriated by the regions. Contrary to widespread belief, however, neutrality of local public debt is not guaranteed in general. Shifts in the intertemporal pattern of local taxes change the net wealth of local property owners if distortionary residence-based taxes are imposed to service the local debt. |
