IDEAS home Printed from https://ideas.repec.org/p/fae/wpaper/2017.14.html
   My bibliography  Save this paper

Can a hazardous event be another source of poverty traps ?

Author

Listed:
  • Can Askan Mavi

    () (Université Paris 1 Panthéon Sorbonne – Ecole d'économie de Paris)

Abstract

This paper aims to present another explanation for poverty traps, by the presence of hazardous event probability. We show that adaptation and mitigation policies have different effects on the occurrence of poverty traps : the former could cause a poverty trap while the latter could save from the trap since it decreases the abrupt event probability. As a result, we present a new trade-off between adaptation and mitigation policy other than the usual dynamic trade-off highlighted in many studies (Zemel (2015), Tsur and Zemel (2015)), which is crucial for developing countries. Our simulation results show that when the economy faces a higher risk, adaptation investment increases more relative to mitigation activity. We also show that a trapped economy adopts an aggressive exploitation policy with higher abrupt event risk while the economy at high equilibrium becomes more precautionary.

Suggested Citation

  • Can Askan Mavi, 2017. "Can a hazardous event be another source of poverty traps ?," Working Papers 2017.14, FAERE - French Association of Environmental and Resource Economists.
  • Handle: RePEc:fae:wpaper:2017.14
    as

    Download full text from publisher

    File URL: http://faere.fr/pub/WorkingPapers/Askan%20Mavi_FAERE_WP2017.14.pdf
    File Function: First version, 2017
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ikefuji, Masako & Horii, Ryo, 2012. "Natural disasters in a two-sector model of endogenous growth," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 784-796.
    2. Bovenberg, A Lans & Smulders, Sjak A, 1996. "Transitional Impacts of Environmental Policy in an Endogenous Growth Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 861-893, November.
    3. Strulik, Holger, 2012. "Patience and prosperity," Journal of Economic Theory, Elsevier, vol. 147(1), pages 336-352.
    4. Quah, Danny T, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," Economic Journal, Royal Economic Society, vol. 106(437), pages 1045-1055, July.
    5. Schumacher, Ingmar, 2009. "Endogenous discounting via wealth, twin-peaks and the role of technology," Economics Letters, Elsevier, vol. 103(2), pages 78-80, May.
    6. Le Kama, Alain Ayong & Schubert, Katheline, 2007. "A Note On The Consequences Of An Endogenous Discounting Depending On The Environmental Quality," Macroeconomic Dynamics, Cambridge University Press, vol. 11(02), pages 272-289, April.
    7. Quah, Danny, 1996. "Twin peaks : growth and convergence in models of distribution dynamics," LSE Research Online Documents on Economics 2278, London School of Economics and Political Science, LSE Library.
    8. Karine Constant & Carine Nourry & Thomas Seegmuller, 2011. "Polluting Industrialization," Working Papers halshs-00633608, HAL.
    9. Bommier, Antoine & Lanz, Bruno & Zuber, Stéphane, 2015. "Models-as-usual for unusual risks? On the value of catastrophic climate change," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 1-22.
    10. Chimeli, Ariaster B. & Braden, John B., 2005. "Total factor productivity and the environmental Kuznets curve," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 366-380, March.
    11. Azariadis, Costas, 1996. "The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-496, December.
    12. Ren, Bijie & Polasky, Stephen, 2014. "The optimal management of renewable resources under the risk of potential regime shift," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 195-212.
    13. Yacov Tsur & Amos Zemel, 2016. "The Management of Fragile Resources: A Long Term Perspective," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(3), pages 639-655, November.
    14. Bénassy, Jean-Pascal & Brezis, Elise S., 2013. "Brain drain and development traps," Journal of Development Economics, Elsevier, vol. 102(C), pages 15-22.
    15. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
    16. Zemel, Amos, 2015. "Adaptation, mitigation and risk: An analytic approach," Journal of Economic Dynamics and Control, Elsevier, vol. 51(C), pages 133-147.
    17. Schou, Poul, 2002. " When Environmental Policy Is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 605-620, December.
    18. Danny Quah, 1996. "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics," CEP Discussion Papers dp0280, Centre for Economic Performance, LSE.
    19. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
    20. Bommier, Antoine & Lanz, Bruno & Zuber, Stéphane, 2015. "Models-as-usual for unusual risks? On the value of catastrophic climate change," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 1-22.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Abrupt damage; Occurrence Hazard; Poverty trap; Adaptation; Mitigation;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fae:wpaper:2017.14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mireille Chiroleu-Assouline). General contact details of provider: http://edirc.repec.org/data/faereea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.