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Voluntary contributions with uncertainty: the environmental quality

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  • JOUVET, Pierre-André

    ()
    (GREQAM, Marseille and GREMARS, Université de Lille III)

Abstract

This paper presents an overlapping generations model of environmental externalities with a depollution technology. Each agent concerned by the environmental degradation can voluntarily contribute in order to reduce it. Contributing to the environmental quality means financing depollution activities and uncertainty concerns its efficiency since it's not always clear or certain what effects will result from a reduction of pollution. We show that if an agent is sufficiently risk averse, voluntary contribution is a decreasing function of average efficiency of depollution technology. If on the contrary, the substitution effect is weaker than the pollution effect, the opposite holds. We show that precaution about environmental quality has two possible consequencies which depend on agent risk aversion. Therefore, understanding the implication of precautionary attitude, leads us to the consideration of the agents' risk aversion characterization and studying the effect of an increase in risk aversion implies a knowledge on prudent attitude. So, we have to conclude that precaution and risk aversion are two complementary and indissociable concepts.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998020.

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Date of creation: 01 Mar 1998
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Handle: RePEc:cor:louvco:1998020

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Keywords: Environmental management; Uncertainty; Public goods; Voluntary contributions; Precaution; Risk;

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  1. Chichilnisky, G. & Heal, G., 1993. "Global Environmental Risks," Discussion Papers 1993_03, Columbia University, Department of Economics.
  2. Bernheim, B Douglas & Bagwell, Kyle, 1988. "Is Everything Neutral?," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 308-38, April.
  3. JOUVET, Pierre André & MICHEL, Philippe & PESTIEAU, Pierre, 1996. "Altruism, voluntary contributions and neutrality. The case of environmental quality," CORE Discussion Papers 1996067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Kimball, Miles S. & Mankiw, N. Gregory, 1989. "Precautionary Saving and the Timing of Taxes," Scholarly Articles 3443105, Harvard University Department of Economics.
  5. Feldstein, Martin, 1988. "The Effects of Fiscal Policies when Incomes Are Uncertain: A Contradiction to Ricardian Equivalence," American Economic Review, American Economic Association, vol. 78(1), pages 14-23, March.
  6. Warr, Peter G., 1982. "Pareto optimal redistribution and private charity," Journal of Public Economics, Elsevier, vol. 19(1), pages 131-138, October.
  7. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
  8. Solow, Robert M, 1986. " On the Intergenerational Allocation of Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 141-49.
  9. Marini Giancarlo & Scaramozzino Pasquale, 1995. "Overlapping Generations and Environmental Control," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 64-77, July.
  10. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
  11. Gollier, C. & Jullien, B. & Treich, N., 1997. "Learning and Irreversibility: An Econmic Interpretation of the "Precautionnary Principle"," Papers 97.470, Toulouse - GREMAQ.
  12. Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
  13. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
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Cited by:
  1. Johanna Etner & Meglena Jeleva & Pierre-Andre Jouvet, 2009. "Pessimism Or Optimism: A Justification To Voluntary Contributions Toward Environmental Quality ," Australian Economic Papers, Wiley Blackwell, vol. 48(4), pages 308-319, December.

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