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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
    as

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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
    1. Stefan Baumgärtner & Moritz A. Drupp & Martin F. Quaas, 2017. "Subsistence, Substitutability and Sustainability in Consumption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(1), pages 47-66, May.
    2. Moritz A. Drupp, 2018. "Limits to Substitution Between Ecosystem Services and Manufactured Goods and Implications for Social Discounting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(1), pages 135-158, January.
    3. 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.
    4. 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.
    5. I. Bateman & R. Brouwer & S. Ferrini & M. Schaafsma & D. Barton & A. Dubgaard & B. Hasler & S. Hime & I. Liekens & S. Navrud & L. De Nocker & R. Ščeponavičiūtė & D. Semėnienė, 2011. "Making Benefit Transfers Work: Deriving and Testing Principles for Value Transfers for Similar and Dissimilar Sites Using a Case Study of the Non-Market Benefits of Water Quality Improvements Across E," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 50(3), pages 365-387, November.
    6. Arnaud Costinot & Dave Donaldson & Cory Smith, 2016. "Evolving Comparative Advantage and the Impact of Climate Change in Agricultural Markets: Evidence from 1.7 Million Fields around the World," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 205-248.
    7. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-240, Winter.
    8. Barton, David N., 2002. "The transferability of benefit transfer: contingent valuation of water quality improvements in Costa Rica," Ecological Economics, Elsevier, vol. 42(1-2), pages 147-164, August.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    substitutability; context; willingness to pay for the environment; inferior good; needs;

    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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