I am happy to announce that my article entitled “The Aggregation Dilemma in Climate Change Policy Evaluation” has been accepted for publication in the journal Climate Change Economics.
The article deals with the following question:
We show that a policy maker who ignores regional data and instead relies on aggregated integrated assessment models is likely underestimating the carbon price and thus the required climate policy. Based on a simple theoretical model we give conditions under which the Aggregation Dilemma is expected to play a role in climate change cost-benefit analysis. We then study the importance of the Aggregation Dilemma with the integrated assessment model RICE (Nordhaus, 2000).
Aggregating all regions of the RICE-99 model into one region yields a 40% lower social cost of carbon than the RICE model itself predicts. Based on extrapolating the results a country-level integrated assessment model would give a more than eight times higher social cost of carbon compared to a fully aggregated model. We suggest that these tentative results require researchers to re-think the aggregation level used in integrated assessment models and to develop models at much lower levels of aggregation than currently available.
Here is the article if you are interested: pdf
Just before the summer break I get this nice news in my mailbox:
Dear Prof. Ingmar Schumacher,
I am pleased to inform you that your paper has been accepted for publication in the European Journal of Operational Research.
So what is this paper about? It is a theoretical contribution together with Professor Georg Müller-Fürstenberger from the University of Trier on how inter-regional externalities can become overwhelmingly crucial if one considers a dynamic setting.
I am happy to announce that my article entitled “Threshold Preferences and the Environment”, co-authored with Benteng Zou from the University of Luxembourg, has been accepted for publication in the Journal of Mathematical Economics. While the journal will publish a slightly shortened version of the article (without section 2), you can find the full version HERE. What is the paper about?
There is a new article of mine that I would like to announce, entitled “The endogenous formation of an environmental culture“, and I am happy to tell you that it is forthcoming in the journal the European Economic Review.
The article is summarized as follows:
This article presents a mechanism explaining the surge in environmental culture across the globe. Based upon empirical evidence, we develop an overlapping generations model with environmental quality and endogenous environmental culture. Environmental culture may be costlessly transmitted intergenerationally, or via costly education.
The model predicts that for low wealth levels, society is unable to free resources for environmental culture. In this case, society will only invest in environmental maintenance if environmental quality is sufficiently low. Once society has reached a certain level of economic development, then it may optimally invest a part of its wealth in developing an environmental culture. Environmental culture has not only a positive impact on environmental quality through lower levels of consumption, but it improves the environment through maintenance expenditure for wealth-environment combinations at which, in a restricted model without environmental culture, no maintenance would be undertaken. Environmental culture leads to a society with a higher indirect utility at steady state in comparison to the restricted model.
Our model leads us to the conclusion that, for societies trapped in a situation with low environmental quality, investments in culture may induce positive feedback loops, where more culture raises environmental quality which in turn raises environmental culture. We also discuss how environmental culture may lead to an Environmental Kuznets Curve.
So what is this all about?
I am happy to annonce that my article entitled “Is environmentally induced income variability a driver of human migration?“, co-authored with Luca Marchiori and Jean-François Maystadt, has been accepted for publication in the journal Migration and Development. Luca Marchiori is a researcher who currently works at the Central Bank of Luxembourg, while Jean-François Maystadt is now a senior lecturer at the University of Lancaster. I have known them both from our time as PhD students in Louvain-la-Neuve, and we have co-authored the article on which this one is built, entitled “The Impact of Weather Anomalies on Migration in sub-Saharan Africa“, which has been published in the Journal of Environmental Economics and Management in 2012.
Here is a quick summary of the article:
The role of environmentally induced income variability as a determinant of migration has been studied little to none. We provide a theoretical discussion based on a ‘risk aversion channel’ and an overview of the empirical literature on this. We also extend a previous empirical study on 39 sub-Saharan African countries with yearly data from 1960 to 2000 by including income variability and its weather determinants. Our findings lead us to acknowledge that, based on our dataset and methodology, income variability is a negligible driver of migration decisions at the macroeconomic level.
So why is this interesting?
I am happy to announce that my article “Insurance and Climate-Driven Extreme Events” co-authored with Professor Georg Müller-Fürstenberger (see bottom for more information) from the University of Trier, Germany, has been accepted for publication in the Journal of Economic Dynamics and Control. We would like to thank especially Professor Ireland for his help and comments.
This is a short summary of the main findings of the article:
We investigate how insurance affects agents’ decisions when being faced by endogenous, climate-driven extreme events. This is not only important in order to understand how the possibility of insurance augments mitigation and saving decisions, but it also improves our understanding of how insurance should be provided. Since there are no studies as of now that rely on such an integrated approach, we extend the literature along two lines. Firstly, we develop a neoclassical growth framework with endogenous extreme events and an insurance sector. Secondly, we introduce a simulation method that allows us to explicitly take these extreme events into account and which yields additional numerical insights. In doing so we can fully characterize and quantify the impact of different insurance policies for mitigation and economic growth decisions.
Our analytical results and computational experiments show that i) transparency of the insurance sector is the decisive requisite for abatement activities, implying substantial policy opportunities; ii) a decentralized economy will under-invest in abatement without adequate policy interventions; iii) precautionary beliefs on the frequency of extreme events lead to more sustainability; iv) a social security system which prices insurance fairly is preferable to an insurance industry which provides insurance with an overhead.
So why is this important?