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Welfare Measurement Under Threats Of Environmental Catastrophes


  • Tsur, Yacov
  • Zemel, Amos


Welfare measures under threats of environmental catastrophes are studied using the "parable" apparatus of Weitzman and Lofgren [22]. The occurrence probability of the catastrophic event is driven (at least partly) by anthropogenic activities such as natural resource exploitation. Without external effects, the green NNP is a genuine welfare measure vis-à-vis a particular parable economy. Often, however, the occurrence hazard constitutes a public bad, treated as an externality by agents who ignore their own contribution to its accumulation. In such cases the green NNP, although accounting for the event hazard rate per se, fails to properly internalize future effects on the hazard rate of current economic activities and as a result overestimates welfare. The bias term associated with the green NNP is derived and expressed in a simply and interpretable form.

Suggested Citation

  • Tsur, Yacov & Zemel, Amos, 2005. "Welfare Measurement Under Threats Of Environmental Catastrophes," Discussion Papers 14987, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
  • Handle: RePEc:ags:huaedp:14987

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    References listed on IDEAS

    1. Ayal Kimhi, 1996. "Demographic composition of farm households and its effect on time allocation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(4), pages 429-439.
    2. Kimhi, Ayal, 1996. "Demographic Composition of Farm Households and Its Effect on Time Allocation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(4), pages 429-439, November.
    3. Ayal Kimhi, 2004. "Family Composition and Off-Farm Participation Decisions in Israeli Farm Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(2), pages 502-512.
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