Public Good Provision with Robust Decision Making
AbstractIn this paper, we study a two-country dynamic setup with environmental externalities and potential model misspecification in relation to this public good. Under model uncertainty, robust policies help to correct the inefficiencies associated with free riding on public good provision, implying that there are welfare benefits from robust policies even when the fear of model misspecification proves to be unfounded. However, the incentive to free ride on the precautionary policies of the other country may discourage the implementation of robust policies, despite their welfare superiority.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3996.
Date of creation: 2012
Date of revision:
model uncertainty; externalities; robust policies;
Find related papers by JEL classification:
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Athanassoglou, Stergios & Xepapadeas, Anastasios, 2012. "Pollution control with uncertain stock dynamics: When, and how, to be precautious," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 304-320.
- Vardas, Giannis & XEPAPADEAS, Anastasios, 2008.
"Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management,"
10236, University Library of Munich, Germany.
- Giannis Vardas & Anastasios Xepapadeas, 2010. "Model Uncertainty, Ambiguity and the Precautionary Principle: Implications for Biodiversity Management," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 45(3), pages 379-404, March.
- George Economides & Apostolis Philippopoulos, 2008. "Growth enhancing policy is the means to sustain the environment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 207-219, January.
- Konstantinos Angelopoulos & George Economides & Apostolis Philippopoulos, 2010. "First-and second-best allocations under economic and environmental uncertainty," Working Papers 2010_35, Business School - Economics, University of Glasgow.
- Svec, Justin, 2012.
"Optimal fiscal policy with robust control,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 36(3), pages 349-368.
- Dennis, Richard, 2010. "How robustness can lower the cost of discretion," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 653-667, September.
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