Voluntary contributions with uncertainty: the environmental quality

Pierre-André Jouvet

No 1998020, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper presents an overlapping generations model of environmental externalities with a depollution technology. Each agent concerned by the environmental degradation can voluntarily contribute in order to reduce it. Contributing to the environmental quality means financing depollution activities and uncertainty concerns its efficiency since it's not always clear or certain what effects will result from a reduction of pollution. We show that if an agent is sufficiently risk averse, voluntary contribution is a decreasing function of average efficiency of depollution technology. If on the contrary, the substitution effect is weaker than the pollution effect, the opposite holds. We show that precaution about environmental quality has two possible consequencies which depend on agent risk aversion. Therefore, understanding the implication of precautionary attitude, leads us to the consideration of the agents' risk aversion characterization and studying the effect of an increase in risk aversion implies a knowledge on prudent attitude. So, we have to conclude that precaution and risk aversion are two complementary and indissociable concepts.

Keywords: Environmental management; Uncertainty; Public goods; Voluntary contributions; Precaution; Risk (search for similar items in EconPapers)
JEL-codes: D62 D80 H41 Q29 (search for similar items in EconPapers)
Date: 1998-03-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Voluntary Contributions with Uncertainty: The Environmental Quality (1998)
Working Paper: Voluntary Contributions with Uncertainty: the Environmental Quality (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1998020

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