Maddalena FERRANNA soutiendra sa thèse « Three Essays on the Decision Making under Risk and Equity Concerns » à 14:30salle MF 323 - Manufacture des Tabacs.
Membres du jury:
Christian GOLLIER, professeur, Université Toulouse 1 Capitole
Nicolas TREICH, Chercheur, Toulouse School of Economics
Stéphane ZUBER, Chargé de Recherche, Paris Scool of Economics
Claude d’ASPREMONT, professeur, Université catholique de Louvain
Marc FLEURBAEY, Directeur de Recherche, Université de Princeton
This thesis consists of three self-contained papers, each one revolving around the general
theme of how to characterize the optimal public decision making in the presence of a risky
situation that has heterogeneous consequences across the population.
The first essay, "Social Willingness to Pay under Equity Concerns", introduces and characterizes the concept of social premium, which defines the amount that society is ready to pay to eliminate a social risk, i.e. a global risk with heterogeneous impacts. Three approaches to equity are considered: utilitarianism; concerns for the distribution of individual risks, or ex-ante equity approach; concerns for the distribution of realized individual risks, or ex-post equity. In particular, in the class of ex-post equity approaches, I mainly focus on the expected equally distributed equivalent criterion proposed by Fleurbaey (2010). For each approach, I decompose the social premium in a risk premium and an inequality premium, and then study their properties in the small and in the large in a way analogous to the classic Arrow-Pratt result. Interestingly, the approximation separates taste parameters (risk aversion and inequality aversion) and risky measures (variability in either individual expected consumption or realized consumption), which allows to discuss the impact of each component on the social premium. Extensions of the model allow for multiplicative risks and dynamic frameworks. Finally, I present two applications: the social cost derived from the risk of major hurricanes in the US and the mitigation policy to avert the risk of climate change. The first is an example of social risk among contemporaries, the second of a risky situation involving different generations.
The second chapter, "Fairness, Risk and the Social Cost of Carbon", considers the computation of the social cost of carbon in the presence of risk and inequality, and studies how different assumptions about social preferences affect its size. In particular, I introduce a model that disentangles risk aversion, resistance to inter-temporal substitution and intra-generational inequality aversion, based on an ex-post approach to equity. After showing how the social cost of carbon can be derived from the adopted social welfare framework, I analytically determine its main components and provide a second order Taylor approximation to understand their relative importance. Then, I estimate the social cost of carbon based on a simplified version of Nordhaus (2010) RICE model.
Finally, the last chapter, "Optimal Climate Policy: Prevention and Risk Sharing", considers a policy that changes the probability distribution of the climate risk (self-protection choice), and explores whether countries should engage in more mitigation when the risk sharing mechanism is inefficient. The essay focuses exclusively on a utilitarian social planner. By building a parallel between the presence of inefficient risk sharing and the introduction of exogenous climate specific background risks, I determine conditions on risk aversion and prudence that guarantee an increase in mitigation under inefficient risk sharing. Generally speaking, mitigation tends to rise either when the climate event is catastrophic (i.e. low probability, high loss), or when the social planner is not very prudent and the inequality risk small. Contrary to intuition, risk sharing and prevention can be complements. If we consider risk sharing as a type of adaptation, the paper suggests that countries should invest in adaptation of they want to induce a large mitigation effort.
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