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Beyond additive preferences: Economic behavior and the income pollution path

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  • Figueroa, Eugenio
  • Pastén, Roberto

Abstract

Theoretical models of the environmental Kuznets curve (EKC) almost universally assume additive preferences; we demonstrate that under non-additive preferences the sufficient condition to sign the economy's income-pollution path depends on the elasticity of substitution between consumption and environment (and not on the elasticity of marginal utility of consumption). The proposed model provides behavioral content that has been missed in the existing literature. In the model, and also departing from the previous literature, preferences change and evolve (through a variable elasticity of substitution) according to the relative scarcity of the environment.

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  • Figueroa, Eugenio & Pastén, Roberto, 2015. "Beyond additive preferences: Economic behavior and the income pollution path," Resource and Energy Economics, Elsevier, vol. 41(C), pages 91-102.
    • Handle: RePEc:eee:resene:v:41:y:2015:i:c:p:91-102
    DOI: 10.1016/j.reseneeco.2015.04.004
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    References listed on IDEAS

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    Cited by:

    1. Hart, Rob, 2020. "Growth, pollution, policy!," European Economic Review, Elsevier, vol. 126(C).
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    3. David I. Stern, 2017. "The environmental Kuznets curve after 25 years," Journal of Bioeconomics, Springer, vol. 19(1), pages 7-28, April.
    4. Zhang, Wenwen & Chiu, Yi-Bin, 2020. "Do country risks influence carbon dioxide emissions? A non-linear perspective," Energy, Elsevier, vol. 206(C).
    5. Lopez, Ramon E. & Pastén, Roberto & Gutiérrez Cubillos, Pablo, 2022. "Climate change in times of economic uncertainty: A perverse tragedy of the commons?," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 209-225.
    6. Pablo Gutiérrez Cubillos & Roberto Pastén, 2023. "Nonlinear risks: a unified framework," Theory and Decision, Springer, vol. 95(1), pages 11-32, July.
    7. Chiu, Yi-Bin, 2017. "Carbon dioxide, income and energy: Evidence from a non-linear model," Energy Economics, Elsevier, vol. 61(C), pages 279-288.

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    More about this item

    Keywords

    Non-additive preferences; Relative scarcity of the environment; Relative correlation aversion; Environment Kuznets curve;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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