Increase in risk and its effects on welfare and optimal policies in a dynamic setting: The case of global pollution
Grafton, R Quentin; Kompas, Thomas; Long, Ngo
Description
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]
Collections | ANU Research Publications |
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Date published: | 2014 |
Type: | Journal article |
URI: | http://hdl.handle.net/1885/73863 |
Source: | GENEVA Risk and Insurance Review |
DOI: | 10.1057/grir.2014.5 |
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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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