Consequences of heterogeneous inequality aversion in climate coalition models and integrated assessment models

• Applicant: Professorin Dr. Carla Johanna Vogt
• Subject Area: Economic Policy, Applied Economics
• Term: since 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 552939183

The project investigates the effects of heterogeneous inequality aversion in coalition models and integrated assessment models. Previous models are based on the assumption of identical degrees of inequality aversion (IA). This assumption is not consistent with the fact of a constant elasticity of marginal utility (EMU) of consumption. If the assumption of a constant EMU is maintained, the degrees of IA must differ for players in different consumption and income positions on the one hand, and on the other hand also change along growth paths with income and consumption levels. On the one hand, this results in completely new Nash equilibria in coalition models. In optimal growth models and the integrated assessment models derived from them, the assumption of a globally constant EMU cannot be maintained. Therefore, on the other hand, this has considerable consequences for the optimal growth rates of consumption (which no longer have to be constant over time) and the carbon emissions and temperature path derived from them.

• DFG Programme: Research Grants