Climate Policy Under Uncertain and Heterogeneous Climate Damages

We highlight that uncertainty about climate damages and the fact that damages will be distributed heterogeneously across the global population can jointly be an argument for substantially stricter climate policy even if uncertainty and heterogeneity in isolation are not. The reason is that a given climate risk borne by fewer people implies greater welfare losses. However, these losses turn out to be significant only if society is both risk and inequality averse and if climate damages are highly heterogeneous. We discuss how insurance and self-insurance of climate risk could theoretically mitigate this joint effect of uncertainty and heterogeneity and thus admit weaker climate policy. Insurance provides more efficient risk sharing and self-insurance allows strongly impacted individuals to compensate damages by increasing savings. We first use a simple analytical model to introduce the different concepts and then provide more realistic results from the integrated assessment model DICE.     

Comprehension in risk elicitation experiments

Economic experiments are increasingly conducted with field populations for whom comprehension of instructions may be more difficult to achieve. We investigate how framing experimental instructions in a familiar context and incentivizing the experimental task may affect comprehension. Based on an experiment with 146 German farmers, we compare four different versions of a Holt-and-Laury multiple price list. We find that incentives have a small positive effect on comprehension, as measured by the probability of making inconsistent choices and subjects’ self-assessment. In the absence of incentives, framing negatively affects comprehension. Comprehension is enhanced for farmers who score high on a numeracy test. We conclude that contextual framing might confuse subjects, whereas incentives can help to facilitate comprehension of experimental instructions.     

An inspector calls: farm accommodation providers' attitudes to quality assurance schemes in the county of Devon

Estimates suggest that 10 000 farms in the UK offer bed and breakfast (B and B) serviced accommodation. A thorough review of the existing literature indicates over 50% of Devon and Cornwall's farmhouse B and B sector operate without participating in any form of quality assurance inspection scheme. This research executes a stratified postal survey to gain a comprehensive understanding of Devon's farmhouse B and B product, with particular interest in extracting providers' attitudes towards quality assurance inspection schemes. The very representative results suggest a divergence of attitudes towards the notion of quality inspections for all farmhouse B and B providers. Copyright © 2002 John Wiley & Sons, Ltd.