Rare Disasters and Risk Attitudes: International Differences and Implications for Integrated Assessment Modeling

Risk Analysis

Volumn 32, Issue 11, 2012, Pages 1846-1855

  Ding, P ^a   Gerst, M D ^a   Bernstein, A ^a   Howarth, R B ^b   Borsuk, M E ^a  

^a DARTMOUTH COLLEGE   (United States)

^b DARTMOUTH COLLEGE   (United States)

Author keywords

Cost benefit analysis; Economic catastrophe; Elasticity of marginal utility; Equity risk premium; Hierarchical Bayes

Indexed keywords

CLIMATE POLICY; EMPIRICAL APPROACH; HIERARCHICAL BAYES; HIERARCHICAL BAYESIAN; HISTORICAL DATA; INTEGRATED ASSESSMENT; INTEGRATED ASSESSMENT MODELS; INVESTMENT DECISIONS; INVESTMENT MODELS; INVESTMENT RETURNS; MARGINAL UTILITY; PREFERENCE MODELS; RISK ATTITUDE; RISK PREFERENCE; RISK PREMIUM; RISK REDUCTIONS; TRANS-BOUNDARY;

BAYESIAN NETWORKS; CLIMATE MODELS; DISASTERS; ELASTICITY; INFERENCE ENGINES; INVESTMENTS;

RISK PERCEPTION;

ASSESSMENT METHOD; CALIBRATION; CATASTROPHIC EVENT; DATA SET; DECISION MAKING; DISASTER MANAGEMENT; ECONOMIC ANALYSIS; ENVIRONMENTAL POLICY; HIERARCHICAL SYSTEM; INTEGRATED APPROACH; NUMERICAL MODEL; RISK FACTOR;

ARTICLE; BAYES THEOREM; DISASTER; INTERNATIONAL COOPERATION; RISK ASSESSMENT; THEORETICAL MODEL;

BAYES THEOREM; DISASTERS; INTERNATIONALITY; MODELS, THEORETICAL; RISK ASSESSMENT;

EID: 84869495004     PISSN: 02724332     EISSN: 15396924     Source Type: Journal    
DOI: 10.1111/j.1539-6924.2012.01872.x     Document Type: Article

References (50)

1. Sarewitz D, Pielke R, Keykhah M. Vulnerability and risk: Some thoughts from a political and policy perspective. Risk Analysis, 2003; 23(4):805-810.
2. Lorenzoni I, Pidgeon NF, O'Connor RE. Dangerous climate change: The role for risk research. Risk Analysis, 2005; 25(6):1387-1398.
3. Weitzman ML. On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics, 2009; 91(1):1-19.
4. Hoffman S. Overcoming barriers to integrating economic analysis into risk assessment. Risk Analysis, 2001; 31(9):1345-1355.
5. Cox LA. Evaluating and improving risk formulas for allocating limited budgets to expensive risk-reduction opportunities. Risk Analysis. Article first published online: 8 Dec. 2011, doi:10.1111/j.1539-6924.2011.01735.x.
6. Ackerman F, DeCanio SJ, Howarth RB, Sheeran K. Limitations of integrated assessment models of climate change. Climatic Change, 2009; 95(3-4):297-315.
7. Yohe G. Toward an integrated framework derived from a risk-management approach to climate change. Climatic Change, 2009; 95(3):325-339.
8. Hultma NE, Hassenzahl DM, Rayner S. Climate risk. Annual Review of Environment and Resources, 2010; 35:283-303.
9. Nordhaus WD. A Question of Balance: Weighting the Options on Global Warming Policies. New Haven, CT : Yale University Press, 2008.
10. Tol RSJ. Welfare specifications and optimal control of climate change: An application of FUND. Energy Economics, 2002; 24(4):367-376.
11. Plambeck EL, Hope C, Anderson J. The PAGE95 model: Integrating the science and economics of global warming. Energy Economics, 1997; 19(1):77-101.
12. Arrow KJ, Cline W, Maler KG, Munasinghe M, Squitieri R, Stiglitz J. Intertemporal equity, discounting and economic efficiency. Pp. 125-144 in Bruce J, Lee H, Haites E (eds). Climate Change 1995: Economic and Social Dimensions of Climate Change. Cambridge, UK : Cambridge University Press, 1996.
13. Ramsey FP. A mathematical theory of saving. Economic Journal, 1928; 38(152):543-559.
14. Webster M, Forest C, Reilly J, Babiker M, Kicklighter D, Mayer M, Prinn R, Sarofim M, Sokolov A, Stone P, Wang C. Uncertainty analysis of climate change and policy response. Climatic Change, 2003; 61(3):295-320.
15. Manne AS, Mendelsohn R, Richels R. MERGE: A model for evaluating regional and global effects of GHG reduction policies. Energy Policy, 1995; 23(1):17-34.
16. Tol RSJ. Is the uncertainty about climate change too large for expected cost-benefit analysis? Climatic Change, 2003; 56(3):265-289.
17. Anthoff D, Tol RSJ, Yohe GW. Risk aversion, time preference, and the social cost of carbon. Environmental Research Letters, 2009; 4(2):1-7.
18. Mehra R, Prescott E. The equity premium: A puzzle. Journal of Monetary Economics, 1985; 15(2):145-161.
19. Kocherlakota N. The equity premium: It's still a puzzle. Journal of Economic Literature, 1996; 34(1):42-71.
20. Barro RJ. Rare disasters and asset markets in the twentieth century. Quarterly Journal of Economics, 2006; 121(3):823-866.
21. Maddison, A. Growth and Interaction in the World Economy. Washington, DC : AEI Press, 2005.
22. Hofstede G. Culture's Consequences, 2nd ed. Beverly Hills, CA : Sage Publications, 1984.
23. Barro RJ, Ursua JF. Consumption disasters in the twentieth century. American Economic Review, 2008; 98(2):58-63.
24. Rietz TA. The equity risk premium: A solution. Journal of Monetary Economics, 1998; 22(1):117-131.
25. Barro RJ, Jin T. On the size distribution of macroeconomic disasters. Econometrica, 2011; 79(5):1567-1589.
26. Gelman A, Carlin JB, Stern HS, and Rubin DB. Bayesian Data Analysis, 2nd ed. Boca Raton, FL : Chapman & Hall/CRC, 2003.
27. Lucas R. Asset prices in an exchange economy. Econometrica, 1978; 46(6):1429-1445.
28. Blanchard O, Fischer S. Lectures on Macroeconomics. Cambridge, MA : MIT Press, 1989.
29. Cochrane JH. Asset Pricing. Princeton, NJ : Princeton University Press, 2001.
30. Breeden D. An intertemporal asset pricing model with stochastic consumption and investment opportunities. Journal of Financial Economics, 1979; 7(3):265-296.
31. Renn O, Rohrmann B (eds). Cross-Cultural Risk Perception. Dordrecht, The Netherlands : Kluwer Academic Publishers, 2000.
32. Ihaka R, Gentleman R. R: A language for data analysis and graphics. Journal of Computational and Graphical Statistics, 1996; 5(3):299-314.
33. Lunn DJ, Thomas A, Best N, Spiegelhalter D. WinBUGS-A Bayesian modelling framework: Concepts, structure, and extensibility. Statistics and Computing, 2000; 10(4):325-337.
34. Heal G, Kriström B, Uncertainty and climate change. Environmental and Resource Economics, 2002; 22(1-2):3-39.
35. Barro RJ, Sala-i-Marin X. Economic Growth, 2nd ed. Cambridge, MA : MIT Press, 2004.
36. Slovic P, Finucane ML, Peters E, MacGregor DG. Risk as analysis and risk as feelings: Some thoughts about affect, reason, risk, and rationality. Risk Analysis, 2004; 24(2):311-322.
37. Bontempo RN, Bottom WP, Weber, EU. Cross-cultural differences in risk perception: A model-based approach. Risk Analysis, 1997; 17(4):479-488.
38. Weber EU, Hsee C. Cross-cultural differences in risk perception, but cross-cultural similarities in attitudes towards perceived risk. Management Science, 1998; 44(9):1205-1217.
39. Weber EU, Hsee C. Culture and individual judgment in decision making. Applied Psychology, 2000; 49(1):32-61.
40. Atkinson G, Dietz S, Helgeson J, Hepburn CJ, Saelen H. Siblings, not triplets: Social preferences for risk, inequality and time in discounting climate change. Economics: The Open-Access, Open-Assessment E-Journal, 2009; 3, :2009/26.
41. Barsky RB, Juster FT, Kimball MS, Shapiro MD. Preference parameters and behavioral heterogeneity: An experimental approach in the health and retirement study. Quarterly Journal of Economics, 1997; 112(2):537-579.
42. Jaeger CC. Risk management and integrated assessment. Environmental Modeling and Assessment, 1998; 3:211-225.
43. Hardaker JB, Fleming E, Lien G. How should governments make risky policy decisions? Australian Journal of Public Administration, 2009; 68(3):256-271.
44. Palacios-Huerta I, Santos TJ. A theory of markets, institutions, and endogenous preferences. Journal of Public Economics, 2004; 88:601-627.
45. Epstein LG, Zin SE. Substitution, risk aversion, and the temporal behavior of consumption and asset returns: A theoretical framework. Econometrica, 1989; 57(4):937-969.
46. Vissing-Jorgensen A, Attanasio OP. Stock-market participation, intertemporal substitution, and risk-aversion. American Economic Review, 2003; 93:383-391.
47. Bansal R, Yaron A. Risks for the long run: A potential resolution of asset pricing puzzles. Journal of Finance, 2004; 59:1481-1509.
48. Kaufman N. The bias of integrated assessment models that ignore climate catastrophes. Climatic Change, 2012; 110:575-595.
49. Crost B, Traeger C. Risk and Aversion in the Integrated Assessment of Climate Change. Berkeley, CA: Department of Agricultural and Resource Economics, 2010.
50. Schreurs MA, Tiberghien Y. Multi-level reinforcement: Explaining European Union leadership in climate change mitigation. Global Environmental Politics, 2007; 7(4):19-46.