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Could the environment be a normal good for you and an inferior good for me? A theory of context-dependent substitutability and needs
[L'environnement pourrait-il être un bien normal pour vous et un bien inférieur pour moi ? Une théorie de la substituabilité dépendante du contexte et des besoins]

Author

Listed:
  • Marion Dupoux

    (GU - Göteborgs Universitet = University of Gothenburg, IFPEN - IFP Energies nouvelles, EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Vincent Martinet

    (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPS - Centre d'Economie de l'ENS Paris-Saclay - Université Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay)

Abstract

Theoretical models often assume the environment to be a normal good, irrespective of one's income. However, a priori, nothing prohibits an environmental good from being normal for some individuals and inferior for others. We develop a conceptual framework in which private consumption and an environmental public good act as substitutes or complements for satisfying different needs. Subsequently, the environment can switch between normal and inferior depending on one's income and environment and corresponding prevalent needs. If the environment is inferior for some range of income, then the willingness to pay for environmental preservation becomes non-monotonic with respect to income. We discuss the relevance of our framework in the context of (income-adjusted) unit benefit transfers, dual-rate discounting and the Environmental Kuznets curve.

Suggested Citation

  • Marion Dupoux & Vincent Martinet, 2022. "Could the environment be a normal good for you and an inferior good for me? A theory of context-dependent substitutability and needs [L'environnement pourrait-il être un bien normal pour vous et un," Post-Print hal-03693920, HAL.
    • Handle: RePEc:hal:journl:hal-03693920
    DOI: 10.1016/j.reseneeco.2022.101316
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03693920
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    More about this item

    Keywords

    Environment; Public goods; Context-dependant substituability; Need; Willingness to Pay; Inferior good;
    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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