Are Policymakers Ambiguity Averse?

Loïc Berger and Valentina Bosetti

The Economic Journal, 2020, vol. 130, issue 626, 331-355

Abstract: We investigate the ambiguity preferences of a unique sample of real-life policymakers at the Paris UN climate conference (COP21). We find that policymakers are generally ambiguity averse. Using a simple design, we are moreover able to show that these preferences are not necessarily due to an irrational behaviour, but rather to intrinsic preferences over unknown probabilities. Exploring the heterogeneity within our sample, we also show that the country of origin and the degree of quantitative sophistication affect policymakers' attitudes towards compound risk, but not towards ambiguity. Robustness results are obtained in a lab experiment with a sample of university students.

Date: 2020
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