We consider a simple, two period, consumption-savings model with future income uncertainty that examines the interplay of savings, precautionary savings, loss aversion, and risk. We provide the relevant theory, followed by empirical tests based on subject-specific choices, and the measurement of...

A group of decision makers simultaneously make contributions towards a green fund that reduces the future probability of a climate catastrophe. We derive the theoretical predictions of the effects on contributions arising from 'behavioral parameters' such as loss aversion and present-bias;...

The paper derives the optimal carbon tax in closed-form from an integrated assessment of climate change. The formula shows how carbon, temperature, and economic dynamics quantify the optimal mitigation effort. The model's descriptive power is comparable to numeric models used in policy advising....

Using firm and industry data, we establish two facts: (i) Uncertainty about demand conditions not only reduces export sales and exporting probabilities but also makes exports less sensitive to trade policy; (ii) the most productive exporters are more affected by higher industry-wide expenditure...

Common integrated assessment models produce the counterintuitive result that higher risk aversion does not lead to stronger near-term abatement. This paper re-examines this result with a DICE model that is fully coupled with a thermohaline circulation model. It also features Epstein-Zin utility...

A formula is derived for the social cost of carbon (SCC) that takes account of intragenerational income inequality and its evolution with economic growth. The social discount rate (SDR) should be adjusted to account for intragenerational and intergenerational inequality aversion and for risk...

What is the appropriate lump-sum compensation for loss of work income in personal injury cases? Since generally future work income is not known with certainty, compensation for its loss must be based on statistical considerations. Typically, courts have based awards on mean or median work...

Courts typically base compensation for loss of income in personal injury cases on either mean or median work income. Yet, quantatively, mean and median incomes are typically very different. For example, in the US median income is 65 percent of mean income. In this paper we use economic theory to...

There is an emerging consensus that carbon emissions must be limited. An attractive approach to promoting carbon reductions is to encourage reductions in deforestation. But any such strategy must confront a basic problem: agents that might be induced to reduce their actions which would reduce...

We use perturbation methods to derive a rule for the optimal risk-adjusted social cost of carbon (SCC) that incorporates the effects of uncertainties associated with climate and the economy from a calibrated DSGE model. We allow for different aversions to risk and intertemporal fluctuations,...