weight on downside risk [as modeled by Gul (1991)]. Policy uncertainty is induced by the Disappointment aversion implies that …This paper studies the effect of policy uncertainty on the formation of new activities in Romer's (1994) type of an … uncertainty induces first-order adverse effects, whereas policy uncertainty leads to second-order effects when consumers maximize …

continue to hold even if the coefficient of relative risk aversion approaches zero (that is, even if the marginal utility of … income is constant so that agents are risk neutral in the conventional sense) …

activities. This paper demonstrates that uncertainty may induce similar costs. This argument is illustrated in the context of … and intermediate products used in domestic production. The present paper shows that uncertainty acts as an implicit tax on …, uncertainty inhibits the formation of new activities. Unlike the tariff, however, uncertainty does not benefit the government with …