Private investment and government protection

Private investment and government protection
Carolyn Kousky, Carolyn Kousky
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Last edited by MARC Bot
December 17, 2020 | History

Private investment and government protection

"Hurricane Katrina did massive damage because New Orleans and the Gulf Coast were not appropriately protected. Wherever natural disasters threaten, the government -- in its traditional role as public goods provider -- must decide what level of protection to provide to an area. It does so by purchasing protective capital, such as levees for a low-lying city.We show that if private capital is more likely to locate in better-protected areas, then the marginal social value of protection will increase with the level of protection provided. That is, the benefit function is convex, contrary to the normal assumption of concavity. When the government protects and the private sector invests, due to the ill-behaved nature of the benefit function, there may be multiple Nash equilibria. Policy makers must compare them, rather than merely follow local optimality conditions, to find the equilibrium offering the highest social welfare.There is usually considerable uncertainty about the amount of investment that will accompany any level of protection, further complicating the government's choice problem. We show that when deciding on the current level of protection, the government must take account of the option value of increasing the level of protection in the future"--National Bureau of Economic Research web site.

Publish Date
Language
English

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Edition Availability
Cover of: Private investment and government protection
Private investment and government protection
2006, National Bureau of Economic Research
in English
Cover of: Private investment and government protection
Private investment and government protection
2006, John F. Kennedy School of Government, Harvard University
in English
Cover of: Private investment and government protection
Private investment and government protection
2006, National Bureau of Economic Research
electronic resource / in English

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Book Details


Edition Notes

Title from PDF file as viewed on 6/28/2006.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.

Published in
Cambridge, MA
Series
NBER working paper series -- working paper 12255, Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12255.

Classifications

Library of Congress
HB1

The Physical Object

Format
[electronic resource] /

ID Numbers

Open Library
OL31759781M
LCCN
2006619564

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December 17, 2020 Created by MARC Bot Imported from Library of Congress MARC record