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Choosing between adaptation and prevention with an increasing probability of a pandemic

Listed author(s):
  • Berry, Kevin
  • Finnoff, David
Registered author(s):

    The risk of pandemics is increasing, driven by changes in human behavior and climate, both of which are difficult for policymakers to control. There are two main strategies available for reacting to these changes. This paper considers the decision to invest in either adaptation (domestic) capital or prevention (foreign) capital before a pandemic in an interval of time when pandemic risk is increasing. This paper demonstrates how relatively small investments in the two strategies can provide large savings through smaller expected future damages. The technical relationships between adaptation, prevention and risk also determine the optimal mixture of investment over time. As risk increases, the technical relationships between these three stocks causes the optimal mixture of strategies to change over time.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167268116301160
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    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 132 (2016)
    Issue (Month): PB ()
    Pages: 177-192

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    Handle: RePEc:eee:jeborg:v:132:y:2016:i:pb:p:177-192
    DOI: 10.1016/j.jebo.2016.06.007
    Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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    1. Shogren, Jason F. & Crocker, Thomas D., 1999. "Risk and Its Consequences," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 44-51, January.
    2. Skiba, A K, 1978. "Optimal Growth with a Convex-Concave Production Function," Econometrica, Econometric Society, vol. 46(3), pages 527-539, May.
    3. Berry, Kevin & Finnoff, David & Horan, Richard D. & Shogren, Jason F., 2015. "Managing the endogenous risk of disease outbreaks with non-constant background risk," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 166-179.
    4. de Zeeuw, Aart & Zemel, Amos, 2012. "Regime shifts and uncertainty in pollution control," Journal of Economic Dynamics and Control, Elsevier, vol. 36(7), pages 939-950.
    5. Zemel, Amos, 2015. "Adaptation, mitigation and risk: An analytic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 133-147.
    6. Sally Kane & Jason Shogren, 2000. "Linking Adaptation and Mitigation in Climate Change Policy," Climatic Change, Springer, vol. 45(1), pages 75-102, April.
    7. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    8. Finnoff, David & Shogren, Jason F. & Leung, Brian & Lodge, David, 2007. "Take a risk: Preferring prevention over control of biological invaders," Ecological Economics, Elsevier, vol. 62(2), pages 216-222, April.
    9. Yacov Tsur & Cees Withagen, 2013. "Preparing for catastrophic climate change," Journal of Economics, Springer, vol. 110(3), pages 225-239, November.
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