Natural capital investment under knightian uncertainty

Takao Asano, Akihisa Shibata

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Abstract

In this paper, we develop a simple two-period model of natural capital investment under Knightian uncertainty and analyze the effects of changes in the degree of ambiguity on the optimal natural capital investment. We find that the degree of Knightian uncertainty affects a government's natural capital investment. Moreover, we find that the direction of the effect of the Knightian uncertainty depends on the nature of uncertainty, that is, on whether the uncertainty is about the future level of natural capital or about the return from saving.

Original languageEnglish
Pages (from-to)529-547
Number of pages19
JournalEnvironment and Development Economics
Volume19
Issue number5
DOIs
Publication statusPublished - Oct 2014

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ASJC Scopus subject areas

  • Development
  • Environmental Science(all)
  • Economics and Econometrics

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