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Voluntary Contributions with Uncertainty: The Environmental Quality

  • Pierre-Andr� Jouvet

    (GREQAM, Marseille; GREMARS, University of Lille III)

This article presents a model in which production causes pollution that diminishes the welfare of its agents. Each agent is concerned with the quality of its environment and may voluntary contribute to improve it by financing depollution technology. The effectiveness of this technology on the quality of the environment is uncertain. We show that if an agent is sufficiently risk averse, voluntary contribution is a decreasing function of the average efficiency of depollution technology. If, on the contrary, the pollution effect is weaker than the substitution effect, the opposite holds. We show that precaution about environmental quality has two possible consequences that depend on agents' risk aversion. Therefore, the implications of a precautionary attitude lead us to consider the agents' risk-aversion characterization, which implies knowledge about prudent attitude. The Geneva Papers on Risk and Insurance Theory (1998) 23, 151–165. doi:10.1023/A:1008678228249

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Article provided by Palgrave Macmillan in its journal The Geneva Papers on Risk and Insurance Theory.

Volume (Year): 23 (1998)
Issue (Month): 2 (December)
Pages: 151-165

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Handle: RePEc:pal:genrir:v:23:y:1998:i:2:p:151-165
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  1. 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.
  2. Jouvet, P-A. & Michel, P. & Pestieau, P., 1996. "Altruism, Voluntary Contributions and Neutrality. The Case of Environmental Quality," G.R.E.Q.A.M. 96a32, Universite Aix-Marseille III.
  3. Chichilnisky, G. & Heal, G., 1993. "Global Environmental Risks," Discussion Papers 1993_03, Columbia University, Department of Economics.
  4. B. Douglas Bernheim & Kyle Bagwell, 1989. "Is Everything Neutral?," NBER Working Papers 2086, National Bureau of Economic Research, Inc.
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  6. Gollier, C. & Jullien, B. & Treich, N., 1997. "Learning and Irreversibility: An Econmic Interpretation of the "Precautionnary Principle"," Papers 97.470, Toulouse - GREMAQ.
  7. Kimball, Miles S & Mankiw, N Gregory, 1989. "Precautionary Saving and the Timing of Taxes," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 863-79, August.
  8. Kihlstrom, Richard E. & Mirman, Leonard J., 1974. "Risk aversion with many commodities," Journal of Economic Theory, Elsevier, vol. 8(3), pages 361-388, July.
  9. Solow, Robert M, 1986. " On the Intergenerational Allocation of Natural Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 88(1), pages 141-49.
  10. 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.
  11. 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.
  12. Warr, Peter G., 1982. "Pareto optimal redistribution and private charity," Journal of Public Economics, Elsevier, vol. 19(1), pages 131-138, 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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