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Optimal Expectation...
Optimal Expectations and the Welfare Cost of Climate Variability
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- Alem, Yonas, 1974 (author)
- Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik, Enheten för miljöekonomi,Department of Economics, Environmental Economics Unit
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Colmer, Jonathan (author)
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(creator_code:org_t)
- Göteborg : University of Gothenburg, 2013
- English.
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Series: Working Papers in Economics (online), 1403-2465 ; 578
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Abstract
Subject headings
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- We show that increased climate variability (a proxy for future income uncertainty) reduces farmers’ subjective well-being, consistent with the theory of optimal expectations (Brunnermeier & Parker, 2005), using panel data from rural Ethiopia and a new data set containing daily atmospheric parameters. The magnitude of our result indicates that a one standard deviation (7%) increase in climate variability has an equivalent effect on life satisfaction to a two standard deviation (1-2%) decrease in consumption. This effect is one of the largest determinants of life satisfaction in rural Ethiopia.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Keyword
- climate variability; uncertainty; subjective well-being; fixed effects
Publication and Content Type
- vet (subject category)
- rap (subject category)
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