Increase in risk and its effects on welfare and optimal policies in a dynamic setting: The case of global pollution
This paper studies the effects of an increase in risk on welfare and optimal policies in a stochastic dynamic model of global pollution. In a first step, we focus on the case of a single decision maker, and make use of an approach pioneered by Kimball (2014) for studying the impact of a marginal change in risk in optimal stochastic control models. Using a simple model with only one state variable and one control variable, we show how the optimal carbon tax responds to an increase in risk. It is...[Show more]
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|Source:||GENEVA Risk and Insurance Review|
|01_Grafton_Increase_in_risk_and_its_2014.pdf||205.62 kB||Adobe PDF||Request a copy|
|02_Grafton_Increase_in_risk_and_its_2014.pdf||190.34 kB||Adobe PDF||Request a copy|
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