English, Article, Journal or magazine article edition: Risk,inequality and time in the welfare economics of climate change: is the workhorse model underspecified? Hakon Saelen; Giles Atkinson; Simon Dietz; ...

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Bookmark: http://trove.nla.gov.au/version/20805
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Risk,inequality and time in the welfare economics of climate change: is the workhorse model underspecified?
Author
  • Hakon Saelen
  • Giles Atkinson
  • Simon Dietz
  • Jennifer Helgeson
  • Cameron Hepburn
Physical Description
  • preprint
Notes
  • In the workhorse model of welfare economics, the elasticity of marginal utility, often denoted as @#019E, 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 tlhree concepts to be disentangled. This theoretical lacuna is important, particularly for the economics of climate change, which is a global, long-run, uncertain externality. Much debate, for instance in the wake of the Stern Review (Stern, 2007a) has focused on the appropriate value for @#019E. 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 and a richer model should be considered.
  • Climate Change, Discounting, Cost-Benefit Analysis, Risk Aversion, Intertemporal Substitution, Inequality Aversion, Intergenerational Equity
  • RePEc:oxf:wpaper:400
Language
  • English
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