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
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