WP 2016.30 2016 FAERE Prize
Common Resources Management and the “Dark Side” of Collective Action : an Impact Evaluation for Madagascar’s Forests

Sébastien Desbureaux

A sufficient level of collective action between community members is often presented as a strong pre-requisite to sustainably governing local common property resources (CPR).
What if in some contexts instead, strong collective action led to short-term depletion of CPR instead of their sustainable use ? This paper brings to light causal evidence on the environmental impact of establishing community-managed forests in Madagascar and highlights the complexities underlying collective action in their sustainable management. I compile fine-scale deforestation data over 15 years, use a unique spatial census of locally managed CPR and mobilize firsthand field data from four case studies to show that transferring management rights to local communities has failed to decrease deforestation. Instead, the policy has led to an increase in deforestation in some areas, often when collective action was strong, not when it was weak. This is what I call the possible “dark side” of collective action.

WP 2016.29
Phasing out the U.S. Federal Helium Reserve: Policy insights from a world helium model

Published in Resource and Energy Economics (2018), 54, 186-211.

Olivier Massol – Omer Rifaat

This paper develops a detailed partial equilibrium model of the global helium market to study the effects of the recently decided rapid phase out of the U.S. Federal Helium Reserve (FHR), a vast strategic stockpile accumulated during the 1960s. The model incorporates a detailed representation of that industry and treats both helium producers and the FHR as players in a dynamic non-cooperative game. The goal of each player is assumed to be the maximization of discounted profit, subject to technical and resource constraints. We consider two alternative policies aimed at organizing the phase out of the FHR: the currently implemented one and a less stringent one whereby the FHR would be allowed to operate as a profit-maximizing agent during a 20-year extended period. Evidences gained from a series of market simulations indicate that, compared to the current policy, the less stringent policy mandate systematically increases the financial return to the U.S. federal budget, always enhances environmental outcomes as it lowers helium venting into the atmosphere, and also augments global welfare in three out of the four scenarios considered in the paper.

WP 2016.28
Merchants of Doubt: Corporate Political Influence when Expert Credibility is Uncertain

Mireille Chiroleu-Assouline – Thomas P. Lyon

A key role of science-based non-governmental organizations (NGOs) is to communicate scientific knowledge to policymakers. However, recent evidence has emerged showing that industry-backed groups often attempt to undermine the credibility of such NGOs and weaken their ability to influence policy. To investigate the mechanisms by which a firm can profitably create doubt about scientific information, we use a signaling model of interest-group lobbying in which the policymaker has fixed costs of taking action. We explore two mechanisms for the creation of doubt. The first involves using Bayesian persuasion to imply that the NGO may be a radical extremist whose lobbying is not credible. The second involves the creation of a think tank which can offer its own testimony on scientific matters. We show the firm prefers that the think tank does not act as a credible moderate, but instead sometimes takes radical, non-credible, positions. We identify conditions under which each mechanism is preferred by the firm.

WP 2016.27
The role of conflict for optimal climate and immigration policy

Fabien Prieur – Ingmar Schumacher

In this article we investigate the role that internal and external conflict plays for optimal climate and immigration policy. Reviewing the empirical literature, we put forward five theses regarding the link between climate change, migration, and conflict. Based on these theses, we then develop a theoretical model in which we take the perspective of the North who unilaterally chooses the number of immigrants from a pool of potential migrants that is endogenously determined by the extent of climate change. Accepting these migrants allows increases in local production which not only increases climate change but also gives rise to internal conflicts. In addition, those potential migrants that want to move due to climate change but that are not allowed to immigrate may induce external conflict. While we show that the external and internal conflict play a significant yet decisively different role, it is the co-existence of both conflicts that makes policy making difficult. Considering only one conflict induces significant immigration but no mitigation. Allowing for both types of conflict, then depending on parameters, either a steady state without immigration but with mitigation will be optimal, or a steady state with a larger number of immigrants but less mitigation. Furthermore, we find the possibility of Skiba points, signaling that optimal policy depends on initial conditions, too. During transition we examine the substitutability and complementarity between the mitigation and immigration policy.

WP 2016.26
Global warming as an asymmetric public bad

Louis-Gaëtan Giraudet – Céline Guivarch

We extend the canonical dynamic game of global warming to capture three stylized facts: (i) while most countries are expected to suffer damages, some might enjoy short-term benefits; (ii) countries’ exposure to impacts bears little relation to their mitigation capabilities; (iii) some adaptation technologies, such as air conditioning, may exacerbate warming. These sources of asymmetry add free driving to the classical free riding problem. This opens up possibilities for excessive mitigation in a non-cooperative regime, even though damages outweigh benefits. Moreover, it restricts the possibilities of Pareto improvements without transfers. Finally, it can provide a rationale for differentiating Pigouvian prices across countries.

WP 2016.25
The land use change time-accounting failure

Marion Dupoux

Land use change (LUC) is the second human-induced source of greenhouse gases (GHG). This paper warns about the LUC time-accounting failure in internalizing GHG impacts in economic appraisal (within policies). This emerges from (i) relative carbon prices commonly following the Hotelling rule as if climate change were regarded as an exhaustible resource problem and (ii) a uniform annualization (i.e. constant flows over time) of LUC impacts supported by most energy policies. First, carbon prices time evolution should account for the climate change framework specificities (natural carbon absorption, uncertainty), which makes a departure from the Hotelling rule necessary. Second, there is a carbon dynamic after land conversion: GHG impact flows are strictly decreasing over time. With a theoretical framework, I show that the employment of the uniform annualization, within a benefit-cost analysis, enhances both the discounting overwhelming effect and the carbon price increase, whatever the type of impact (emissions or sequestrations). It results in skewed values of LUC-related projects as long as relative carbon prices deviate from the Hotelling rule. I apply this framework to global warming impacts of bioethanol in France and quantify this bias. In particular, carbon profitability payback periods under the uniform approach do not reflect the LUC effective carbon investment. This potentially modifies the conclusions regarding a project’s achievement of imposed environmental criteria.

WP 2016.24
L’économicisation de la nature, réalités historiques et mythes contemporains

Published in Revue économique (2018), 120-146.

Harold Levrel – Antoine Missemer

It is more and more common to read in scientific papers that there is a deep trend of economicization of nature that would be expressed through monetization mechanisms, privatization and commodification. No doubt some phenomena of economicisation are real. Nevertheless, they deserve to be closely examined to see firstly that they are not new in the history of human-nature relationships, and to emphasize that they compete with some trends of dis-economicization of nature, that it is also necessary to take into account today in order to have a complete picture of the situation. Our contribution therefore aims to clarify the debate, distinguishing the reality of such phenomenon with some myths in this economization of nature, stressing that this trend is neither new nor irreversible, nor linear and it does not seem inextricably linked to the raise of the (neo) liberalism.

WP 2016.23
Effect of gold mining on income distribution in Ghana

George Adu – Franklin Amuakwa-Mensah – George Marbuah – Justice Tei Mensah

This paper examined the effect of mining on household income and welfare and how such effects are distributed over different quantiles of income and welfare. Using the three most recent rounds of the Ghana Living Standards Surveys together with information on the location of gold mines during the survey years, we estimated effects of living in a mining area on real gross income, employment income, and real per capita household expenditure (a proxy for welfare) using average and quantile treatment effect models. We find robust evidence of negative effect of mining on household income and welfare. Our results also indicate that the income reducing effect of mining activity falls heavily on households at bottom of the income distribution. In the case of household welfare, the interesting revelation from our result is that the negative effect of mining falls largely on both the lower and upper ends of the welfare distribution, with much heavier burden at the lower relative to the upper tail. Our paper, thus, provides ample evidence that mining activity does not only reduce income and welfare, but further increases inequality in the distribution of income and welfare.

WP 2016.22
Pollution and infectious diseases

Published in International Journal of Economic Theory (2018), 14(4), 351-372.

Stefano Bosi – David Desmarchelier

Recent empirical contributions highlight the negative impact of pollution on labor supply. This relationship is explained by two mechanisms: (1) pollution modifies agents’ work-leisure trade-off as it deteriorates their working conditions (incentive effect); (2) a polluted environment is likely to generate more frequent epidemic outbreaks and to affect agents’ immune systems (health effect). Bosi et al. (2015) explore the aggregate consequences of the incentive effect and show that it can generate endogenous fluctuations of the economic activity. The present paper rather focuses on the health effect as we study a Ramsey model augmented with the spread of infectious disease. We find that industrial pollution may generate limit cycles around an endemic steady state. More precisely, the economic system may undergo a transcritical bifurcation followed by two Hopf bifurcations near this steady state.

WP 2016.21
A simple degrowth model

Published in Ecological Economics (2017), 136, 266-281.

Marc Germain

With the help of a growth model à la Ramsey with a natural resource and pollution and relying on the postulates of ecological economics, this paper studies the impact of voluntary degrowth
policies on production and welfare. The instrument of these policies is a tax levied on the natural resource. These policies are assumed to be applied by the public authorities after the downturn of the households’utility function due to the increase of pollution. With respect to the laissez-faire situation, their impact is to simultaneously decrease production and pollution on the one hand and increase welfare on the other. A delayed reaction of the public authorities after the turnover of the households’utility function implies a higher tax rate on the resource during the first periods. If the authorities’preference for the future is higher, then welfare gains from the degrowth policy are lower for the first generations of the dynasty and higher for the later. The impact of technical progress saving the resource or improving the pollution treatment is also analysed.

WP 2016.20
Bring Back Our Light: Power Outages and Industrial Performance in Sub-Saharan Africa

Justice Tei Mensah

Power cuts have become a characteristic feature of many Sub-Saharan African economies. This paper attempts to investigate the micro and macro impacts of power outages by estimating the effects on firm revenue and productivity, and output growth of the manufacturing and industrial sectors. Further, I evaluate the impact of self-generation in ameliorating the effects of electricity shortages on firm performance using a quasi-experimental approach. Results from the analysis reveal significant negative effects of electricity shortages on firm revenue and productivity, and output growth of manufacturing and industrial sectors. Finally, contrary to the notion that self-generation may be helpful to firms during outage periods, evidence from this paper suggest the reliance on self-generation is associated with productivity losses albeit short run revenue gains.

WP 2016.19
The actual impact of shale gas revolution on the U.S. manufacturing sector

Yassine Kirat

This paper investigates the comparative advantage allowed by the U.S shale gas revolution to the U.S manufacturing sector. It estimates the response of various economic variables related to the U.S manufacturing sector using dynamic panel data models that allow each sector’s response to vary with its energy intensity. We show that the decline in natural gas prices in the US relative to natural gas prices in Europe has led to an increase in industrial activity by nearly 2%. We show also that exports increased by 0,86% and imports decreased by 1,11%. Moreover, we find an empirical evidence that the relationship between natural gas prices and imports or exports has experienced structural breaks. Overall, we conclude that the shale gas revolution expended some industries but it does not have a strong effect on the manufacturing sector as a whole.

WP 2016.18
An evaluation of French municipal solid waste pricing system

Houévoh Amandine Gnonlonfin

This study investigates the preventive effect and substitution effect of the Municipal Solid Waste (MSW) pricing policy in France. We examine the relationship between quantities of MSW and incentive taxes with the use of a panel of 96 French metropolitan departments between 2005 and 2011, and we use panel data and Heckman two-step estimation in order to consider sample selection. We perform the analysis for the collection of MSW and six technologies of management of the waste, namely recycling materials, composting, incineration with and without energy recovery, landfilling and dumping. We estimate the elasticity of the collection of MSW and the elasticity of these technologies in relation to three incentive taxes of the French pricing system by considering the endogeneity of municipality’s decisions about both local incentive tax and technology choice. The results confirm that the French MSW pricing system has a preventive and a substitution effect and show that these effects are complementary.

WP 2016.17
Climate agreements in a mitigation-adaptation game

Published in Journal of Public Economics (2018), 165, 101-113.

Basak Bayramoglu – Michael Finus – Jean-François Jacques

We study the strategic interaction between mitigation (public good) and adaptation (private good) strategies in a climate agreement. We show that these two strategies are strategic substitutes considering various definitions of substitutability. Moreover, adaptation may cause mitigation levels between different countries to be no longer strategic substitutes but complements. We analyze under which conditions this leads to more succesful self-enforcing agreements. We argue that our results extend to many important externality problems involving public goods.

WP 2016.16
Trade in environmental goods and sustainable development: What are we learning from the transition economies’ experience?

Published in Environmental Economics and Policy Studies (2018), 20(4), 785-827.

Natalia Zugravu-Soilita

We investigate the causal effects of trade intensity in environmental goods (EGs) on air and water pollution by treating trade, environmental policy and income as endogenous. We estimate a system of reduced-form, simultaneous equations on extensive data, from 1995 to 2003, for transition economies that include Central and Eastern Europe and the Commonwealth of Independent States. Our empirical results suggest that although trade intensity in EGs (pooled list) reduces CO₂ emissions mainly through an indirect income effect, it increases water pollution because the income-induced effect does not offset the direct harmful scale-composition effect. No significant effect is found for SO2 emissions with respect to the list of aggregated EGs. In addition to diverging effects across pollutants, we show that results are sensitive to EGs’ classification: e.g., cleaner technologies and products, end-of-pipe products, environmentally preferable products, etc. For instance, a double profit—environmental and economic—is found only for “cleaner technologies and products” in the models explaining greenhouse gases emissions. Interesting findings are discussed for imports and exports of various classifications of EGs. Overall, we cannot support global and uniform trade liberalization for EGs in a sustainable development perspective. Regional or bilateral trade agreements taking into account the states’ priorities could act as building blocks towards a global, sequentially achieved liberalization of EGs.

WP 2016.15
Environmental Incentives: Nudge or Tax?

Benjamin Ouvrard – Sandrine Spaeter

We consider a model where individuals can voluntarily contribute to improve the quality of the environment. They differ with regard to their confidence in the announcement made by the regulator about the risk of pollution, modelized in a RDEU model, and to their environmental sensitivity. We compare the efficiency of a tax in increasing individual contributions with the advantages of a nudge based on the announcement of the social optimum to each individual. Under some conditions, a nudge performs better than a tax, in particular, because the individual reaction depends directly on sensitivity, while only indirectly with a tax. Moreover, a nudge does not require information about private contributions, contrary to a tax based on the contributions that are not provided compared to the social optimum. Lastly, its implementation is much cheaper. Yet, some drawbacks are discussed and simulations illustrate our results.

WP 2016.14
Interaction between CO2 emissions trading and renewable energy subsidies under uncertainty: feed-in tariffs as a safety net against over-allocation

Published in Climate Policy (2019), 18(9), 1002-1018.

Oskar Lecuyer – Philippe Quirion

We study the interactions between a CO2 emissions trading system (ETS) and renewable energy subsidies under uncertainty over electricity demand and energy costs. We first provide evidence that uncertainty has generated over-allocation (defined as an emissions cap above business-as-usual emissions) during at least part of the history of most ETSs in the world. We then develop an analytical model and a numerical model applied to the European Union electricity market in which renewable energy subsidies are justified only by CO2 abatement. We show that in this context, when uncertainty is small, renewable energy subsidies are not justified, but when it is big enough, these subsidies increase expected welfare because they provide CO2 abatement even in the case of over-allocation.
The source of uncertainty is important when comparing the various types of renewable energy subsidies. Under uncertainty over electricity demand, renewable energy costs or gas prices, a feed-in tariff brings higher expected welfare than a feed-in premium because it provides a higher subsidy when it is actually needed i.e. when the electricity price is low. Under uncertainty over coal prices, the opposite result holds true. These results shed new light on the ongoing switch from feed-in tariffs to feed-in premiums in Europe.

WP 2016.13
Willingness to pay for environmental quality and social capital influence in Sweden

George Marbuah

The growing recognition of social capital as an important parameter necessary for shaping pro-environmental behaviour and attitudes is well established in the literature and continues to engage the attention of policymakers, academics and citizens in many jurisdictions. In this paper, we contribute to this strand of literature by investigating the extent to which various elements of social capital influences Swedish public’s tendency to contribute financially or through lifestyle changes in order to protect the environment. Using data from the latest wave of the International Social Survey Programme (ISSP) on the environment in 2010, we explore empirically the link between individuals’ willingness to pay (WTP) and social capital influence using an ordered logistic model. The results show, that, individuals in Sweden are fairly willing to pay for the environment and that this decision is principally and significantly influenced by elements of social capital. In particular, we find quite robust results to show that social and institutional trust, environmental group membership among related civic participation activities and adherence to environmental norms significantly impacts the probability of individuals’ decision to sacrifice toward environmental sustainability by paying higher environmental taxes, prices or through standard of living adjustments.

WP 2016.12
How useful are (Censored) Quantile Regressions for Contingent Valuation? Evidence from a flood survey

Victor Champonnois – Olivier Chanel

We investigate the interest of quantile regression (QR) and censored quantile regression (CQR) to deal with issues from contingent valuation (CV) data. Indeed, although (C)QR estimators have many properties of interest for CV, the literature is scarce and restricted to six studies only. We proceed in three steps. First, we provide analytical arguments showing how (C)QR can tackle many econometric issues associated with CV data. Second, we show by means of Monte Carlo simulations, how (C)QR performs w.r.t. standard (linear and censored) models. Finally, we apply and compare these four models on a French CV survey dealing with flood risk. Although our findings show the usefulness of QR for analyzing CV data, findings are mixed on the improvements from CQR estimates with respect to QR estimates.

WP 2016.11
The determinants of household’s flood mitigation decisions in France – evidence of feedback effects from past investments

Published in Ecological Economics (2017), 131, 342-352.

Claire Richert – Katrin Erdlenbruch – Charles Figuières

In this paper, we investigate the determinants of private flood mitigation in France. We conducted a survey among 331 inhabitants of two flood-prone areas and collected data on several topics, including individual flood mitigation, risk perception, risk experience, and sociodemographic characteristics. We estimate discrete choice models to explain either the presence of precautionary measures implemented by the household, or the intention to take such measures. We test the robustness of the Protection Motivation Theory in France, discuss its scope and investigate the existence of feedback effects from past investments on people’s protection intentions. Our results confirm that the Protection Motivation Theory is a relevant framework to describe the mechanisms of private flood mitigation in France, highlighting in particular the importance of threat appraisal, threat experience appraisal, and coping appraisal. Some sociodemographic features are also significant to explain private flood mitigation. Our results also give evidence for feedback effects as they suggest that implementing precautionary measures reduces perceptions of the risk of flooding. The existence of these feedback effects implies that intended measures, rather than implemented ones, should be examined to explore further the determinants of private flood mitigation.

WP 2016.10
From Primary Resources to Useful Energy: The Pollution Ceiling Efficiency Paradox

Jean-Pierre Amigues – Michel Moreaux

We study an economy producing energy services from a polluting fossil fuel and a carbon free renewable resource under a constraint on the admissible atmospheric carbon concentration, equivalently under a constraint on the admissible temperature. The transformation rates of natural primary resources energy into useful energy are costly endogenous variables. Choosing higher efficiency rates requires to bring into operation more sophisticated ones, that is more costly ones. We show that, independently of technical progress, along a perfect foresight equilibrium path which is Pareto optimal, the transformation rate of any exploited resource should increase though out time, excepted within the period during which the carbon constraint is binding, what we call the ‘ceiling paradox’.

WP 2016.09
La transition énergétique est-elle favorable aux branches à fort contenu en emploi ? Une approche input-output pour la France

Published in Revue d’économie politique (2017), 127(5), 851-887.

Quentin Perrier – Philippe Quirion

In the public debate on energy transition in France, employment figures prominently. We calculate, for the French economy in 2010, the employment content and greenhouse gas intensities in different branches, that is to say the number of jobs and tonne-CO2 equivalent per million euro of final demand. For this we use the input-output table at the most disaggregated level available (64 branches). We develop and then apply a unique methodology to decompose the differences in job content between industries in five factors: the rate of imports of final products, the rate of imports of intermediate goods, the rates of taxes and subsidies, the levels of wages and the share of labor compensation in value added. Finally, we study some intersectoral substitutions that would result from an energy transition to reduce emissions of greenhouse gases.

WP 2016.08
Trade and fisheries subsidies

Published in Journal of International Economics (2018), 112, 13-32.

Basak Bayramoglu – Brian R. Copeland – Jean-François Jacques

World Trade Organization members included fishery subsidies in the Doha round of trade negotiations, which subsequently stalled. This paper develops a simple model to show why prospects for a deal on fisheries subsidies may be difficult. Typically international spillover effects create incentives among exporters to negotiate reductions in subsidies: one country’s subsidy worsens other exporters’ terms of trade. These incentives may not exist in fisheries for 3 reasons. First, if fisheries are severely depleted, one country’s subsidy reduces its long run supply of fish, raising prices and benefiting other fish exporting countries. Second, if governments use other policies to manage fish stocks, then changes in subsidies may not affect harvests and hence may not generate international spillover effects. And third, even if governments were compelled to reduce fishery subsidies, there may be little real effect because governments would be motivated to weaken other regulations targeting the fish sector.

WP 2016.07
Precautionary Storage in Electricity Markets

Tunç Durmaz

As renewable energy depends on meteorological shocks and is non-controllable, the overall energy production becomes riskier with the rising renewable share. Although this has led to a renewed interest in storage technologies, not much consideration has been given to energy storage due to precautionary motives. In our study, we look at to what extent a convex marginal utility (prudence) and a convex marginal cost (frugality) can spur precautionary energy storage. We set up a simple theoretical model of energy consumption and production with intermittent renewable sources, dispatchable thermal systems, and energy storage. First, we characterize the optimum and demonstrate how prudence and frugality can lead to higher levels of energy storage. By applying our findings to perfectly competitive markets, we further show that prudence and frugality increase the market energy price through higher demand for energy storage and decrease price volatility. The results present important lessons about the direct and indirect impacts precautionary motives can have on electricity prices and energy generation decisions.

WP 2016.06
Energy Tax Reform in Time of Crisis : The Case of Energy-Dependent and Open Economies

Emmanuel Combet

The increase in energy prices resulting from energy taxation and environmental pricing is the cornerstone for policies that seek to manage efficiently the energy systems in the long run. However, such a price increase may harm the economy during the transition, when substitutions have not yet taken place. In this paper, we consider an increase in the relative price of energy with respect to labour costs, and we analyse its consequences for aggregate domestic production and employment. A relative price adjustment is implemented through a marginal tax reform by swapping labour taxes for energy taxation. We develop a general equilibrium model of an open-economy assuming unemployment and high dependence to imported energy. Simplified enough to be solved analytically, this model does not restrict the analysis to the neighbourhood of an optimum. We show how the impact on production and employment is sensitive to a set of parameters on 1) the behaviour of the economy (the reactions of domestic wages to unemployment, and external trade to the level of domestic costs), and 2) the initial state of the economy (energy consumptions, import price of fossil energy, levels of unemployment and wages, taxation of energy and labour). When the economy does not benefit from important ‘non-cost’ comparative advantages (the Marshall-Lerner condition holds), the impact is positive regardless of the other parameters. When this condition does not hold, the impact is positive only when wages adjust to compensate the higher energy bills for households, and therefore, to maintain the level of internal demand.

WP 2016.05
Groundwater Overdraft, Electricity, and Wrong Incentives: Evidence from Mexico

Vicente Ruiz

Groundwater overdraft is threatening the sustainability of an increasing number of aquifers in Mexico. The excessive amount of groundwater extracted by farming activities relying on irrigation methods have significantly contributed to this problem. The objective of this paper is to analyse the effect of changes in groundwater’s price over the allocation of different production inputs from a structural approach. Using a combination of multiple micro-data sources, I model the technology of producers facing groundwater overdraft through a Translog cost function. The results following this analysis show that groundwater’s own price elasticity for the sample analysed is -0.54. Moreover, these results also show that both labour and fertiliser can act as substitutes for groundwater, further reacting to changes in groundwater’s price.

WP 2016.04
The nature and impacts of environmental spillovers on housing prices: A spatial hedonic analysis

Published in Revue d’économie politique (2016), 126(5), 921-945.

Masha Maslianskaia-Pautrel – Catherine Baumont

This paper investigates the spatial dimension of the environmental effects. We use recent advances in spatial econometrics to show that hedonic equations produce estimates to be differently interpreted as implicit prices according to spatial models. In particularly, the implicit price of housing attribute combines a feedback effect and a propagation effect and may be interpreted in terms of local or global spillovers. We drive an empirical study in the estuary of the Loire, a rural and urban area well occupied by various natural areas and more artificialized ones. We study various spatial interaction patterns to test the robustness of our estimates and we find that spatial dependencies based on inverse distance and small neighborhoods provide stable estimations. It is consistent too with realistic spatial interaction patterns for household behaviors: information on closer housings is more reliable and comparison areas are in fact limited by the research process. As expected, positive impacts are concentrated on traditional attributes like the proximity to the ocean frontage and quiet places. On the contrary, the presence of various natural wet amenities is negatively valued because of the impression of housing density associated to flood risk. If urban places are more valued by households, it’s rather because rural location are less desired than because of urban intrinsic attributes.

WP 2016.03
Preferences and pollution cycles

Stefano Bosi – David Desmarchelier – Lionel Ragot

We consider a competitive Ramsey economy where a pollution externality affects both consumption demand and labor supply, and we assume the stock of pollution to be persistent over time. Surprisingly, when pollution jointly increases the consumption demand (compensation effect) and lowers the labor supply (leisure effect), multiple equilibria arise near the steady state (local indeterminacy) through a Hopf bifurcation (limit cycle). This result challenges the standard view of pollution as a flow to obtain local indeterminacy, and depends on the leisure effect which renders the pollution accumulation process more volatile.

WP 2016.02
Climate variability and infectious diseases nexus: evidence from Sweden

Published in Infectious Disease Modelling (2017)2(2), 203–217.

Franklin Amuakwa-Mensah – George Marbuah – Mwenya Mubanga

In this paper, we present evidence based on a theoretical model developed that links the impact of climate change on health. Using Swedish data on infectious diseases, we empirically estimate the causal relationship between climate variability and health outcomes. Generally, we find that the number of infectious disease patients and admissions are significantly driven by indicators of climate change and socio-economic variables such as income and number of immigrants. Specifically, the effect of temperature variation on the health outcomes is ambiguous and sensitive to the choice of winter, summer or average temperature. Precipitation is relevant in explaining the number of infectious disease patients and admissions only when summer temperature considered in the model. Further, we find that an increase in carbon emissions directly causes the number patients and admissions in the summer. The relationship between infectious disease proxies (i.e. patients and admissions) and inc ome per capita follows an inverted-U shape.

WP 2016.01
Adaptation and mitigation are not enough: turning to emissions reduction abroad

Published in Environmental and Resource Economics (2016)68(4), 875–891.

Aude Pommeret – Alain Ayong Le Kama

In this paper we focus on a long-term dynamic analysis of the optimal adaptation/mitigation mix in the presence of a pollution threshold above which adaptation is no longer efficient. We account for accumulation in abatement capital, greenhouse gases, and adaptation capital in order to better capture the arbitrage between abatement and adaptation investments. Pollution damages arise from the emissions due to the country consumption but also from the emissions of the rest of the world (ROW). A pollution threshold is then introduced, above which adaptation is no longer efficient. We obtain that if this threshold is lower than the steady-state level of pollution, there is no way for the modeled economy to avoid it. In particular, such a situation will appear if the ROW’s emissions are high. Next step is then to introduce another type of investment allowing for lower ROW pollution ie. emissions reduction abroad through CDM for instance. We obtain that CDM may be a means to avoid a pollution threshold above which adaptation becomes of no use.

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