Risk, inequality and time in the welfare economics of climate change: Is the workhorse model underspecified?

In the workhorse model of welfare economics, the elasticity of marginal utility, η, serves simultaneously to represent aversion to risk, aversion to spatial inequality, and preferences for intertemporal substitution. While Kreps-Porteus-Selden and Epstein-Zin preferences enable risk to be separated from intertemporal substitution, no model enables all three concepts to be disentangled. This theoretical lacuna is important, particularly so for the economics of climate change, which is a global, long-run, uncertain externality. Thus much debate, for instance in the wake of the Stern Review (Stern, 2007a) has focused on the appropriate value for η. This paper tests the suitability of the workhorse model for climate change economics, by surveying the attitudes of over 3000 people to risk, time, and income inequality. The results show that individual attitudes to the three are only weakly correlated. This suggests that because the three concepts are captured by a single parameter, the model is underspecified.

Referanse

Sælen, Håkon, Giles Atkinson, Simon Dietz, Jennifer Helgeson and Cameron Hepburn, 2008. Risk, inequality and time in the welfare economics of climate change: Is the workhorse model underspecified?. Department of Economics Discussion Paper Series, no. 400. University of Oxford. 38pp.

Flere detaljer

  • Språk: Engelsk
  • Kategori: Rapporter
  • Tittel: Risk, inequality and time in the welfare economics of climate change: Is the workhorse model underspecified?
  • Rapportserie/nummer: Department of Economics Discussion Paper Series, no. 400
  • Utgiver: University of Oxford
  • Antall sider: 38

Nøkkelord

Sist oppdatert: 02.01.06

Forfattere

  • Sælen, Håkon
  • Atkinson, Giles
  • Dietz, Simon
  • Helgeson, Jennifer
  • Hepburn, Cameron
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