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On the Value of Life in Rich and Poor Countries and Distributional Weights Beyond Utilitarianism

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  • Olof Johansson-Stenman

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Abstract

This paper discusses the use ofdistributional weights in CBA based on a generalBergson-Samuelson SWF. In particular it illustratessome consequences of applying a SWF characterized byconstant inequality aversion (which includes classicalutilitarianism as a special case), together with aconstant relative risk aversion utility function, whencalculating the damage costs of global warming. Itextends and clarifies earlier unintuitive results, andemphasizes that utility must be seen as fully cardinalin terms of levels in this context. In the specialcase of utilitarianism, on the other hand, it issufficient to be able to make interpersonalcomparisons of utility changes. Copyright Kluwer Academic Publishers 2000

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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 17 (2000)
Issue (Month): 3 (November)
Pages: 299-310

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Handle: RePEc:kap:enreec:v:17:y:2000:i:3:p:299-310

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: cost-benefit analysis; distributional weights; global warming; utility transformations; welfare theory;

References

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  1. Arnold C. Harberger, 1978. "On the Use of Distributional Weights in Social Cost-Benefit Analysis," NBER Chapters, in: Research in Taxation, pages 87-120 National Bureau of Economic Research, Inc.
  2. Azar, Christian & Sterner, Thomas, 1996. "Discounting and distributional considerations in the context of global warming," Ecological Economics, Elsevier, vol. 19(2), pages 169-184, November.
  3. Olof Johansson-Stenman, 1998. "On the problematic link between fundamental ethics and economic policy recommendations," Journal of Economic Methodology, Taylor & Francis Journals, vol. 5(2), pages 263-297.
  4. Diamond, P. A., 1975. "A many-person Ramsey tax rule," Journal of Public Economics, Elsevier, vol. 4(4), pages 335-342, November.
  5. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-97, September.
  6. Hylland, Aanund & Zeckhauser, Richard, 1979. " Distributional Objectives Should Affect Taxes but not Program Choice or Design," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 264-84.
  7. Samuel Fankhauser & Richard Tol & DAVID Pearce, 1997. "The Aggregation of Climate Change Damages: a Welfare Theoretic Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 10(3), pages 249-266, October.
  8. Robin Boadway & Michael Keen, 1991. "Public Goods, Self-Selection and Optimal Income Taxation," Working Papers, Queen's University, Department of Economics 828, Queen's University, Department of Economics.
  9. Christian Azar, 1999. "Weight Factors in Cost-Benefit Analysis of Climate Change," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 13(3), pages 249-268, April.
  10. Charles Blackorby, 1990. "Economic Policy in a Second-Best Environment," Canadian Journal of Economics, Canadian Economics Association, vol. 23(4), pages 748-71, November.
  11. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198292975, October.
  12. Robert J. Brent, 1984. "Use of Distributional Weights in Cost-Benefit Analysis: a Survey of Schools," Public Finance Review, , vol. 12(2), pages 213-230, April.
  13. Robert Ayres & Jörg Walter, 1991. "The greenhouse effect: Damages, costs and abatement," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 1(3), pages 237-270, September.
  14. Dreze, Jean & Stern, Nicholas, 1987. "The theory of cost-benefit analysis," Handbook of Public Economics, Elsevier, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 14, pages 909-989 Elsevier.
  15. Dasgupta, Partha, 1998. "Population, consumption and resources: Ethical issues," Ecological Economics, Elsevier, vol. 24(2-3), pages 139-152, February.
  16. Sen, Amartya K, 1979. "Personal Utilities and Public Judgements: Or What's Wrong with Welfare Economics?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 89(355), pages 537-58, September.
  17. Christiansen, Vidar, 1981. "Evaluation of Public Projects under Optimal Taxation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 48(3), pages 447-57, July.
  18. Paul Ekins, 1995. "Rethinking the costs related to global warming: A survey of the issues," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 6(3), pages 231-277, October.
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Citations

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Cited by:
  1. Adler, Matthew & Hammitt, James & Treich, Nicolas, 2012. "The Social Value of Mortality Risk Reduction: VSL vs. the Social Welfare Function Approach," LERNA Working Papers, LERNA, University of Toulouse 12.08.365, LERNA, University of Toulouse.
  2. Kverndokk, Snorre & Rose, Adam, 2008. "Equity and Justice in Global Warming Policy," International Review of Environmental and Resource Economics, now publishers, vol. 2(2), pages 135-176, October.
  3. Tyron Venn & John Quiggin, 2005. "Accommodating Indigenous Cultural Heritage Values in Resource Assessment: Cape York Peninsula and the MurrayÐDarling Basin, Australia," Murray-Darling Program Working Papers WP5M05, Risk and Sustainable Management Group, University of Queensland.
  4. Dritan Osmani, 2013. "Valuing Equally the Environmental Goods in Rich and Poor Countries in a Post-Kyoto World," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(2), pages 073-099, July.
  5. Johansson-Stenman, Olof, 2001. "Should We Use Distributional Weights in CBA When Income Taxes Can Deal with Equity?," Working Papers in Economics 35, University of Gothenburg, Department of Economics.
  6. Bernard van denBerg & Werner Brouwer & Job van Exel & Marc Koopmanschap, 2005. "Economic valuation of informal care: the contingent valuation method applied to informal caregiving," Health Economics, John Wiley & Sons, Ltd., vol. 14(2), pages 169-183.
  7. Johansson-Stenman, Olof & Konow, James, 2009. "Fairness Concerns in Environmental Economics - Do They Really Matter and If So How?," Working Papers in Economics 398, University of Gothenburg, Department of Economics.
  8. Yamaguchi, Rintaro, 2012. "Discounting, Distribution and Disaggregation," MPRA Paper 46322, University Library of Munich, Germany.
  9. Adler, Matthew & Treich, Nicolas, 2014. "Consumption, Risk and Prioritarianism," TSE Working Papers 14-500, Toulouse School of Economics (TSE).

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