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In this article, I explain socially enforced norms mostly from an economist's perspective, how they emerge and how they diffuse through society. I then investigate the particular role that social norms play for the environment, looking at both the theoretical literature as well as the empirical results. Following that I discuss the reasons for which governmental intervention is necessary when it comes to dealing with social norms and the environment. I also place emphasis on the steps that policy-makers need to take in order to internalize both the externalities from the collective action problem, as well as the impact on the social norm. In addition, I discuss research gaps and provide suggestions for researchers that are interested in dealing with the joint study of collective action problems and social norms. [ABSTRACT FROM AUTHOR]

We analyze how individual risk aversion changes in response to shocks in an agrarian setting, and the role of changes in yields and prices as two potential channels. To do so we specify a theoretical model that describes temporal alterations in risk aversion. Empirically, we test the model's proposition by combining individual‐level panel data with historical rainfall data for rural Thailand and Vietnam. We find that rainfall shocks increase individuals risk aversion, whereby the largest effects are observed among households that are net buyers of food commodities. Regarding potential channels, only prices seem to explain–and even then just to a very small extent–the increase in net buyers' risk aversion. Our findings imply that shocks can increase risk aversion, and, in the absence of functioning credit and insurance markets, may ultimately lead to decisions that perpetuate poverty. [ABSTRACT FROM AUTHOR]

We develop a theoretical model to study the relationship between climate change, migration, and conflicts from the perspective of the recipient countries, which we call collectively the North. The North chooses the number of immigrants it wants to accept together with the amount of climate change mitigation. The potential number of migrants is determined by the extent of climate change in the South. Accepting more migrants allows the North to increase local production but it also exacerbates climate change and gives rise to internal conflicts. Those potential migrants that want to migrate North due to climate change but are not allowed to immigrate may induce external conflicts. We find that a policymaker, subject to the threat of both internal and external conflicts, may either choose a policy that relies more on mitigation with less immigration, or less mitigation and more immigration. Which policy ought to be pursued depends on the relative cost of internal and external conflicts, and the mitigation cost. If either the threat of external or internal conflicts are negligible, then we find that the optimal mitigation and immigration policies are not interdependent any longer. We also discuss when mitigation and immigration policies are substitutes or complements. [ABSTRACT FROM AUTHOR]

We study optimal government policy in a reference model (Rege, 2004, Journal of Public Economic Theory, 6, 65–77) of public good provision and social approval in a dynamic setting. We show that even if complete adherence to the social norm maximizes social welfare it is by no means necessarily optimal to push society toward it. We stress the different roles of social externality and the public good problem. We discuss the problem with the standard crowding in and out argument and analyze the relationship with Pigouvian taxes. We discuss the role of the cost of public funds and show how it can create path dependency, the multiplicity of both optimal equilibria and optimal paths, and discuss the role of parameter instability. [ABSTRACT FROM AUTHOR]

The hope is that the Dasgupta Review will be a true game changer and induce environmental economists to pay much more attention not only to biodiversity itself, but to a more holistic approach in general. The publication I The Economics of Biodiversity: The Dasgupta Review i (Dasgupta, Partha. Environmental and resource economists have, during the last forty years, studied a wide variety of topics, emphasizing climate change, the extraction of natural resources, the energy transition, and also biodiversity or sustainability in general. [Extracted from the article]

We study how the Basel III regulations, namely the Capital-to-Assets Ratio (CAR), the Net Stable Funding Ratio (NSFR) and the Liquidity Coverage Ratio (LCR), are likely to impact banks' profitability (i.e., ROA), capital levels and default. We estimate historical series of the new Basel III regulations for a panel of Luxembourgish banks for a period covering 2003q2-2011q3. We econometrically investigate whether historical LCR and NSFR components, as well as CAR positions are able to explain the variation in a measure of a bank's default risk (approximated by Z-score) and how these effects make their way through banks' ROA and CAR. We find that the liquidity regulations induce a decrease in average probabilities of default. We find that the liquidity regulation focusing on maturity mismatches (i.e., NSFR) induces a decrease in average probabilities of default. Conversely, the impact on banks' profitability is less clear-cut; what seems to matter is banks' funding structure rather than the characteristics of the portfolio of assets. Additionally, we use a model of bank behavior to simulate the banks' optimal adjustments of their balance sheets as if they had to adhere to the regulations starting in 2003q2. Then, we predict, using our preferred econometric model and based on the simulated data, the banks' Z-score and ROA. The simulation exercise suggests that basically all banks would have seen a decrease in their default risk during a crisis episode if they had previously adhered to Basel III. [ABSTRACT FROM AUTHOR]

We extend the literature on the bank lending channel in two aspects. First, rather than following the literature by analyzing the impact of banks’ liquidity (measured via their asset portfolio) on monetary policy transmission, we study the role of banks’ actual liquidity risk, as measured by the Basel III liquidity regulations. Second, we investigate the effect of complying with the Basel III liquidity standards on monetary policy transmission. We use highly detailed bank-level data from Luxembourg for the period 2003q1--2010q4. Our findings are that monetary policy transmission works its way through small banks that also have a large maturity mismatch, as measured by the Net Stable Funding Ratio. In contrast, large banks with a small maturity mismatch increase their lending following a monetary policy shock, which confirms existing results that Luxembourg’s banks are liquidity providers to the European market. Based upon in-sample predictions and upon simulated data from an optimization model that takes the banks’ business models into account, we conclude that the bank lending channel will no longer be effective once banks adhere to the new Basel III liquidity regulations. [ABSTRACT FROM AUTHOR]

This article analyzes an economy where both nonrenewable resources and a costly energy resource are essential inputs in production. The extraction of the nonrenewable resources leads to emissions that increase the probability of a catastrophe. We find that, in contrast to the constant-probability case, the endogenous probability of a catastrophe implies that some nonrenewable resources might optimally be left in the ground. The larger the effect of the fossil energy use on the probability of a catastrophe, the fewer nonrenewable resources should be extracted and the earlier should be the switch to the renewable substitute. The richer a country, the earlier it should shift to the energy substitute. In the trade-off between higher consumption and a higher probability of catastrophe, even small probability changes are likely to be more important for the planner than higher consumption. [ABSTRACT FROM PUBLISHER]