Seminars & webinars
16 July 2015

Social Willingness to Pay under Equity Concerns


Where: Venice
Location:

Fondazione Eni Enrico Mattei
Isola di San Giorgio Maggiore
30124 Venice

***
Video-conference
at FEEM Milan

How to reach: Google map
Event's Timetable:


h. 12.00 Seminar

Information:

Seminars Office, seminars@feem.it

Speakers:

Maddalena Ferranna, Toulouse School of Economics

Abstract

The paper analyzes to which extent risk and equity preferences affect society's willingness to pay to eliminate a social risk, which is defined as a global risk that has differentiated impacts across subgroups of the population. Three approaches to equity are considered: utilitarianism; concerns for the distribution of individual risks; concerns for the distribution of realized individual risks (in particular, the expected equally distributed equivalent criterion proposed by Fleurbaey, 2010). For each approach, I first define a social premium, which extends to the case of social risks the classic Arrow-Pratt risk premium for private risks. Then, I decompose the social premium in a risk premium and an inequality premium, and study their properties in the small and in the large, in a way analogous to the classic Arrow-Pratt result. Extensions of the model allow for multiplicative risks and dynamic frameworks. Finally, I present two applications: the social cost derived by the risk of major hurricanes in the US and the mitigation policy to avert climate change risk.

 

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Social Willingness to Pay under Equity Concerns

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