A Reconsideration of Arrow-Lind: Risk Aversion, Risk Sharing, and Agent Choice
Journal of Natural Resources Policy Research, 6(1):51-56, 2014
Posted: 26 Jan 2014
There are 2 versions of this paper
A Reconsideration of Arrow-Lind: Risk Aversion, Risk Sharing, and Agent Choice
Date Written: January 24, 2014
Abstract
We consider the original Arrow-Lind framework in which a government undertakes a risky project to be shared among many taxpayers. In our model, the taxpayers decide the level of participation in the risky project. Moreover, the amount of taxes collected by the government fully finances the public project. In this case, we show that projects cannot be evaluated only on the basis of expected benefits since the resulting tax determined by the model is incompatible with any risk sharing.
Keywords: Arrow-Lind Theorem, Risk aversion, Risk sharing, Choice
JEL Classification: D81, G10
Suggested Citation: Suggested Citation