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Can the environment be an inferior good ? A theory with context-dependent substitutability and needs

Author

Listed:
  • Marion Dupoux

    (University of Gothenburg)

  • Vincent Martinet

    (INRA, Economie Publique, Paris-Grignon, France)

Abstract

Empirical evidence and theoretical frameworks mostly suggest normality of public environmental goods. In this paper, we argue there is no reason an environmental good should be categorized as inferior, normal or luxury in all decision contexts. We develop a model that allows public environmental goods to switch from one category to another, depending on individual income and environmental quality levels (i.e., the context). Our model is based on needs within which private consumption and environmental goods may interact differently (substitutes/complements). We formalize utility functional forms that comply with our framework. We finally derive some policy implications for environmental benefit transfers.

Suggested Citation

  • Marion Dupoux & Vincent Martinet, 2019. "Can the environment be an inferior good ? A theory with context-dependent substitutability and needs," Working Papers 2019.08, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2019.08
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    File URL: http://faere.fr/pub/WorkingPapers/Dupoux_Martinet_FAERE_WP2019.08.pdf
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    References listed on IDEAS

    as
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    2. Edward B. Barbier & Mikołaj Czajkowski & Nick Hanley, 2017. "Is the Income Elasticity of the Willingness to Pay for Pollution Control Constant?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 663-682, November.
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    4. Baumgärtner, Stefan & Drupp, Moritz A. & Meya, Jasper N. & Munz, Jan M. & Quaas, Martin F., 2016. "Income inequality and willingness to pay for public environmental goods," Economics Working Papers 2016-04, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Czajkowski, Mikołaj & Ahtiainen, Heini & Artell, Janne & Meyerhoff, Jürgen, 2017. "Choosing a Functional Form for an International Benefit Transfer: Evidence from a Nine-country Valuation Experiment," Ecological Economics, Elsevier, vol. 134(C), pages 104-113.
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    Cited by:

    1. Victor Champonnois & Olivier Chanel, 2023. "Accounting for subsistence needs in non-market valuation: a simple proposal," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 66(5), pages 1037-1060, April.

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    More about this item

    Keywords

    substitutability; context; willingness to pay for the environment; inferior good; needs;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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