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Do wealth levels affect the contribution to negative externalities?

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  • Benito-Ostolaza, Juan M.
  • Ezcurra, Roberto
  • Osés-Eraso, Nuria

Abstract

This paper experimentally explores the link between poverty and decisions that lead environmental degradation. In the experiment, individuals with different wealth levels play a game that describes environmental degradation as a contribution to an activity that generates a negative externality. The experimental data show that wealth levels not related to the environment (exogenous poverty) play no significant role in environmental decisions. However, the variation in wealth as a consequence of the contribution to environmental degradation (endogenous poverty) affects the behavior of individuals, that enter a spiral of poverty and environmental degradation. These results suggest the existence of a poverty-environment trap.

Suggested Citation

  • Benito-Ostolaza, Juan M. & Ezcurra, Roberto & Osés-Eraso, Nuria, 2020. "Do wealth levels affect the contribution to negative externalities?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    • Handle: RePEc:eee:soceco:v:87:y:2020:i:c:s2214804319304549
    DOI: 10.1016/j.socec.2020.101579
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