Uncertainty and Insurance in Endogenous Climate Change
AbstractWe investigate the economic impact of stochastic endogenous extreme events and insurance in a growth model. Our analytical results and computational experiments show that i) transparency of the insurance sector is the decisive requisite for abatement activities, implying substantial policy opportunities; ii) we can fully characterize and quantify the impact of uncertainty on the social planner's decisions; iii) a decentralized economy will under-invest in abatement without adequate policy interventions; iv) precautionary beliefs on the frequency of extreme events lead to more sustainability; v) technical change does not change the ordering of the paths but leads to a more sustainable future; v) a social security system which prices insurance fairly is preferable to an insurance industry which provides insurance with an overhead.
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Bibliographic InfoPaper provided by University of Trier, Department of Economics in its series Research Papers in Economics with number 2009-02.
Length: 29 pages
Date of creation: 2009
Date of revision:
economic growth; climate change; insurance; integrated assessment; extreme events; catastrophes;
Find related papers by JEL classification:
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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