FEEM Seminar on “Social Willingness to Pay under Equity Concerns”
To what extent do 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? In her presentation Maddalena Ferranna, Toulouse School of Economics, considers three approaches to equity: utilitarianism, concerns for the distribution of individual risks and concerns for the distribution of realized individual risks. For each approach a social premium is defined and subsequently decomposed in a risk premium and an inequality premium. Finally, two applications are presented: the social cost derived by the risk of major hurricanes in the US and the mitigation policy to avert climate change risk.