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Implications of inequality aversion for international climate policy

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  • Vogt, Carsten
  • Sturm, Bodo

Abstract

In this paper, we extend the Fehr and Schmidt model of inequality aversion to a situation where the players differ with respect to their benefits and costs from contributions to a non-linear public good. A necessary condition for contributing to the public good is that the players' benefit exceeds some critical value. Using data from the impact assessment model RICE and estimates for inequality aversion from the experimental literature, we show that this condition fails to hold for major countries involved in international climate policy.

Suggested Citation

  • Vogt, Carsten & Sturm, Bodo, 2011. "Implications of inequality aversion for international climate policy," ZEW Discussion Papers 11-050, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:11050
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    References listed on IDEAS

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    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
    2. Lange, Andreas & Vogt, Carsten, 2003. "Cooperation in international environmental negotiations due to a preference for equity," Journal of Public Economics, Elsevier, pages 2049-2067.
    3. Lange, Andreas & Löschel, Andreas & Vogt, Carsten & Ziegler, Andreas, 2010. "On the self-interested use of equity in international climate negotiations," European Economic Review, Elsevier, vol. 54(3), pages 359-375, April.
    4. Lange, Andreas & Vogt, Carsten & Ziegler, Andreas, 2007. "On the importance of equity in international climate policy: An empirical analysis," Energy Economics, Elsevier, vol. 29(3), pages 545-562, May.
    5. Urs Fischbacher & Simon Gachter, 2010. "Social Preferences, Beliefs, and the Dynamics of Free Riding in Public Goods Experiments," American Economic Review, American Economic Association, pages 541-556.
    6. Astrid Dannenberg & Bodo Sturm & Carsten Vogt, 2010. "Do Equity Preferences Matter for Climate Negotiators? An Experimental Investigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 91-109.
    7. Blanco, Mariana & Engelmann, Dirk & Normann, Hans Theo, 2011. "A within-subject analysis of other-regarding preferences," Games and Economic Behavior, Elsevier, vol. 72(2), pages 321-338, June.
    8. Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
    9. Lange, Andreas, 2004. "The Impact of Equity-preferences on the Stability of Heterogeneous International Agreements," ZEW Discussion Papers 04-50, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Barrett, Scott, 2005. "Environment and Statecraft: The Strategy of Environmental Treaty-Making," OUP Catalogue, Oxford University Press, number 9780199286096.
    11. Hessel Oosterbeek & Randolph Sloof & Gijs van de Kuilen, 2004. "Cultural Differences in Ultimatum Game Experiments: Evidence from a Meta-Analysis," Experimental Economics, Springer;Economic Science Association, vol. 7(2), pages 171-188, June.
    12. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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    More about this item

    Keywords

    Climate policy; public good game; inequality aversion; voluntary cooperation;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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