We specify a stochastic economy-climate model, adapting Nordhaus' deterministic economy-climate model by allowing for Weitzman-type stochasticity. We show that, under expected power utility, the model is fragile to heavy-tailed distributional assumptions and we derive necessary and sufficient...

This paper develops a dynamic model consisting of two regions (North and South), in which the accumulation of human capital is negatively influenced by the global stock of pollution. By characterizing the equilibrium strategy of each region, we show that the regions' best responses can be...

We analyze the impact of short-run and long-run earthquake risk on Japanese property prices. We exploit a rich panel data set of property characteristics, ward attractiveness information, macroeconomic variables, seismic hazard data, and historical earthquake occurrences, supplemented with...

A Bayesian typically uses data and a prior to produce a posterior. In practice, the data and the posterior are often observed but not the prior. We shall follow the opposite route, using data and the posterior information to reveal the prior. We then apply this theory to (equilibrium) climate...

In the context of extreme climate change, we ask how to conduct expected utility analysis in the presence of catastrophic risks. Economists typically model decision making under risk and uncertainty by expected utility with constant relative risk aversion (power utility); statisticians typically...

This paper studies the interplay between climate, health, and the economy in a stylized world with four heterogeneous regions, labeled ‘West' (cold and rich), ‘China' (cold and poor), ‘India' (warm and poor), and ‘Africa' (warm and very poor). We introduce health impacts into a simple...

This paper studies the interplay between climate, health, and the economy in a stylized world with four heterogeneous regions, labeled ‘West' (cold and rich), ‘China' (cold and poor), ‘India' (warm and poor), and ‘Africa' (warm and very poor). We introduce health impacts into a simple...

This paper studies the interplay between climate, health, and the economy in a stylized world with four heterogeneous regions, labeled ‘West’ (cold and rich), ‘China’ (cold and poor), ‘India’ (warm and poor), and ‘Africa’ (warm and very poor). We introduce health impacts into a...

We specify a stochastic economy-climate model, adapting Nordhaus' deterministic economy-climate model by allowing for Weitzman-type stochasticity. We show that, under expected power utility, the model is fragile to heavy-tailed distributional assumptions and we derive necessary and sufficient...

An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also...