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Natural capital investment under knightian uncertainty

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  • Asano, Takao
  • Shibata, Akihisa

Abstract

In this paper, we develop a simple two-period model of natural capital investment under Knightian uncertainty and analyze the effects of changes in the degree of ambiguity on the optimal natural capital investment. We find that the degree of Knightian uncertainty affects a government's natural capital investment. Moreover, we find that the direction of the effect of the Knightian uncertainty depends on the nature of uncertainty, that is, on whether the uncertainty is about the future level of natural capital or about the return from saving.

Suggested Citation

  • Asano, Takao & Shibata, Akihisa, 2014. "Natural capital investment under knightian uncertainty," Environment and Development Economics, Cambridge University Press, vol. 19(5), pages 529-547, October.
    • Handle: RePEc:cup:endeec:v:19:y:2014:i:05:p:529-547_00
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    Cited by:

    1. Kenjiro Hirata & Shinsuke Ikeda & Masako Ikefuji & Myong-Il Kang & Katsunori Yamada, 2017. "Time Discounting, Ambiguity Aversion, and Preferences for Future Environmental Policies: Evidence from Discrete Choice Experiments," ISER Discussion Paper 1012, Institute of Social and Economic Research, Osaka University.
    2. Agliardi, Elettra & Agliardi, Rossella & Spanjers, Willem, 2016. "Corporate financing decisions under ambiguity: Pecking order and liquidity policy implications," Journal of Business Research, Elsevier, vol. 69(12), pages 6012-6020.
    3. Driouchi, Tarik & Trigeorgis, Lenos & So, Raymond H.Y., 2020. "Individual antecedents of real options appraisal: The role of national culture and ambiguity," European Journal of Operational Research, Elsevier, vol. 286(3), pages 1018-1032.

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