Inattention and pollution regulation policies

Giovanni Di Bartolomeo (), Enrico Saltari and Willi Semmler

No 130, CIMEO, Sapienza University of Rome from Department of Economics and Law, Sapienza University of Rome

Abstract: We study the problem of pollution control enacted by some policy of regulation and mitigation. The policymakers are subjected to a trade--off between welfare increasing economic activity and pollution effects from economic activity having a negative effect on current welfare. We hereby assume policymakers that are inattentive. They may respond imprecisely to the continuously available information since they have a limited information processing capacity or make decisions under limited information. Inattention is modeled by using Nonlinear Model Predictive Control. Specifically, our policymakers solve a dynamic decision problem with finite horizon that involves the repetitive solution of an optimal control problem at each sampling instant in a receding horizon fashion. A shorter horizon is interpreted as a measure of inattention. We find that inattention substantially affects the transition dynamics. It leads to quicker, but more costly, transitions. It also leads to an under-evaluation of the environmental costs that may accelerate climate change.

Date: 2017-01
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.dipecodir.it/wpcom/data/wp_no_130_2017.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:00130

Access Statistics for this paper

More papers in CIMEO, Sapienza University of Rome from Department of Economics and Law, Sapienza University of Rome
Bibliographic data for series maintained by Giovanni Di Bartolomeo ().