Masako Ikefuji

Osaka University | Handai

A Bayesian typically uses data and a prior to produce a posterior. We shall follow the opposite route, using data and the posterior information to reveal the prior. We then apply this theory to inflation forecasts by the Bank of England and the National Institute of Economic and Social Research in an attempt to get some insight into the prior belie...

In this study, we examine the impact of environmental policies on consumption and pollution emissions in the cases of full employment and stagnant economy using a dynamic optimization model featuring a monetary economy with persistent unemployment. If full employment prevails, environmental policies such as emission tax and public pollution abateme...

We analyze the impact of short-run (90 days) and long-run (30 years) earthquake risk on real estate transaction prices in five Japanese cities (Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo), using quarterly data over the period 2006–2015. We exploit a rich panel data set (331,343 observations) with property characteristics, ward attractiveness inform...

We analyze Nordhaus’ DICE model and show that the temperature and CO2 equations are needlessly complicated and can be simplified without loss of essence. In addition, we argue that the damage function can be altered in such a way that it lends itself to experiments involving extreme risk. We conclude that, within the philosophy of the DICE model, s...

This paper develops a two-region (North and South) dynamic model in which regional stocks of effective labor are negatively influenced by the global stock of pollution. By characterizing the equilibrium strategy of each region we show that the regions’ best responses can be strategic complements through a dynamic complementarity effect. The model i...

We analyze a stochastic dynamic finite-horizon economic model with climate change, in which the social planner faces uncertainty about future climate change and its economic damages. Our model (SDICE*) incorporates, possibly heavy-tailed, stochasticity in Nordhaus’ deterministic DICE model. We develop a regression-based numerical method for solving...

This study explores an optimal (pre-committed or ex-ante) environmental tax policy in a three-stage game in which polluting firms strategically choose the location of their plants after the government has chosen the optimal emission tax rate. We show not only that the optimal emission tax is non-decreasing with the declining cost of relocation (e.g...

An expected utility based cost-benefit analysis is, in general, fragile to distributional assumptions. We derive necessary and sufficient conditions on the utility function of consumption in the expected utility model to avoid this. The conditions ensure that expected (marginal) utility of consumption and the expected intertemporal marginal rate of...

This paper studies the interplay between climate, health, and the economy in a stylized world with eleven heterogeneous regions, with special emphasis on USA, Europe, China, India, and Africa. We introduce health impacts into a simple economic integrated assessment model where both the local cooling effect of SO 2 and the global warming effect of C...

This paper examines the implications of the mutual causality between environmental quality and economic growth. While economic growth deteriorates the environment through increasing amounts of pollution, the deteriorated environment in turn limits the possibility of further economic growth. In a less developed country, this link, which we call “lim...

An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also under heavy-tailed distributional assumptions. Our resu...

This paper develops a dynamic model consisting of two regions (North and South), in which the accumulation of human capital is negatively influenced by the global stock of pollution. By characterizing the equilibrium strategy of each region, we show that the regions’ best responses can be strategic complements through a dynamic complementarity effe...

In searching for an appropriate utility function in the expected utility framework, we formulate four properties that we want the utility function to satisfy. We conduct a search for such a function, and we identify Pareto utility as a function satisfying all four desired properties. Pareto utility is a flexible yet simple and parsimonious two-para...

We study structural change in a simple, two-sector endogenous growth model and show that the presence of commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between different goods, the two sectors grow at different rates, whereas the aggregate economy exhibi...

We specify a stochastic economy-climate model, adapting Nordhaus' deterministic economy-climate model by allowing for Weitzman-type stochasticity. We show that, under expected power utility, the model is fragile to heavy-tailed distributional assumptions and we derive necessary and sufficient conditions on the utility function to avoid fragility. W...

Masako Ikefuji), r.j.a.laeven@uvt.nl (Roger Laeven), magnus@uvt.nl (Jan Magnus), chrismuris@gmail.com (Chris Muris).

In the context of extreme climate change, we ask how to conduct expected utility analysis in the presence of catastrophic risks. Economists typically model decision making under risk and uncertainty by expected utility with constant relative risk aversion (power utility); statisticians typically model economic catastrophes by probability distributi...

This paper explores optimal environmental tax policy under which duopoly firms strategically choose the location of their plants in a simple three-stage game. We examine how the relationship between the optimal emission tax and the choice of location of duopoly firms affects the welfare of the home country. We characterize the relationship between...

This note proposes the Burr utility function. Burr utility is a flexible two-parameter family that behaves approximately power-like (CRRA) remote from the origin, while exhibiting exponential-like (CARA) features near the origin. It thus avoids the extreme behavior of the power family near the origin. We show how to characterize Burr utility as a s...

We introduce an accurate, easily implementable, and fast algorithm to compute optimal decisions in discrete-time long-horizon welfaremaximizing problems. The algorithm is useful when interest is only in the decisions up to period T, where T is small. It relies on a flexible parametrization of the relationship between state variables and optimal tot...

This paper studies the interplay between climate, health, and the economy in a stylized world with four heterogeneous regions, labeled &#39West' (cold and rich), &#39China' (cold and poor), &#39India' (warm and poor), and &#39Africa' (warm and very poor). We introduce health impacts into a simple integrated assessment model where both the local coo...

This paper explores optimal environmental tax policy under which duopoly firms strategically choose the location of their plants in a simple three-stage game. We examine how the relationship between the optimal emission tax and the choice of location of duopoly firms affects the welfare of the home country. We characterize the relationship between...

This paper explores the roles of internal and external habit formation in a simple model of endogenous growth with overlapping generations. Unlike the representative agent settings in which the distinction between internal and external habits may not yield significant qualitative differences in working of the model economy, we show that the interna...

This paper studies how habit formation in consumption affects pollution abatement activities and the steady-state growth rate, in the context of an endogenous growth model in which agents derive disutility from the habit stock and pollution. The paper also examines how the effect of technological change in abatement on the optimal growth rate is en...

A mutual link between poverty and environmental degradation is examined in an overlapping generations model. Environmental quality affects labor productivity and wealth dynamics, whereas wealth distribution determines the degree to which agents rely on technology that has a large environmental load, and therefore the evolution of environmental qual...

This paper studies the impact of natural disasters on economic growth in an endoge-nous growth model. Production with the use of fossil fuels as input brings about air pollution, which can be one of the causes of climate change. Climate change may be accompanied by natural disasters that causes serious damage to physical capital stock. We assumed t...

This paper studies sustainability of economic growth considering the risk of natural disasters caused by pollution in an endogenous growth model with physical and human capital accumulation. We consider an environmental tax policy, and show that economic growth is sustainable only if the tax rate on the polluting input is increased over time and th...