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Fat-tailed uncertainty and the learning-effect

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  • Hwang, In Chang

Abstract

One of the recent findings in the economics of climate change is that emissions control plays a significant role in the reduction of the tail-effect of fat-tailed uncertainty on welfare. The current paper gives another perspective: the learning-effect. The effect of emissions control on welfare is decomposed into the direct effect and the learning-effect. Although this has been known for thin-tailed uncertainty in the literature, this paper takes a different approach: the changes in temperature distributions under fat-tailed uncertainty and learning.

Suggested Citation

  • Hwang, In Chang, 2014. "Fat-tailed uncertainty and the learning-effect," MPRA Paper 53671, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:53671
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    File URL: https://mpra.ub.uni-muenchen.de/53671/1/MPRA_paper_53671.pdf
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    References listed on IDEAS

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    Cited by:

    1. Richard S. J. Tol & In Chang Hwang & Frédéric Reynès, 2012. "The Effect of Learning on Climate Policy under Fat-tailed Uncertainty," Working Paper Series 5312, Department of Economics, University of Sussex Business School.
    2. Lemoine, Derek & Traeger, Christian P., 2016. "Ambiguous tipping points," Journal of Economic Behavior & Organization, Elsevier, vol. 132(PB), pages 5-18.
    3. Kelly, David L. & Tan, Zhuo, 2015. "Learning and climate feedbacks: Optimal climate insurance and fat tails," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 98-122.
    4. In Chang Hwang, 2016. "Active learning and optimal climate policy," EcoMod2016 9611, EcoMod.
    5. Hwang, In Chang, 2014. "A recursive method for solving a climate-economy model: value function iterations with logarithmic approximations," MPRA Paper 54782, University Library of Munich, Germany.
    6. Hwang, In Chang & Tol, Richard S.J. & Hofkes, Marjan W., 2016. "Fat-tailed risk about climate change and climate policy," Energy Policy, Elsevier, vol. 89(C), pages 25-35.

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    More about this item

    Keywords

    Climate policy; deep uncertainty; Dismal Theorem; tail-effect; learning-effect;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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