IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00850543.html
   My bibliography  Save this paper

Threshold Preferences and the Environment

Author

Listed:
  • Ingmar Schumacher

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique, IPAG - Business School)

  • Benteng Zou

    (CREA - Center for Research in Economic Analysis - Uni.lu - Université du Luxembourg)

Abstract

In this article we study the implication of thresholds in preferences. To model this we extend the basic model of John and Pecchenino (1994) by allowing the current level of environmental quality to have a discrete impact on how an agent trades off future consumption and environmental quality. In other words, we endogenize the semi-elasticity of utility based on a step function. We motivate the existence of the threshold based on research from political science, from arguments based on regulation and standards, cultural economics as well as ecological economics. Our results are that the location of the threshold determines both the potential steady states as well as the dynamics. For low (high) thresholds, environmental quality converges to a low (high) steady state. For intermediate levels it converges to a stable p-cycle, with environmental quality being asymptotically bounded below and above by the low and high steady state. We discuss implications for intergenerational equity and policy making. As policy implications we study shifts in the threshold. Our results are that, in case it is costless to shift the threshold, it is always worthwhile to do so. If it is costly to change the threshold, then it is worthwhile to change the threshold if the threshold originally was su ciently low. Lump-sum taxes may lead to a development trap and should be avoided if there are uncertainties about the threshold or the eff ectiveness of the policy.

Suggested Citation

  • Ingmar Schumacher & Benteng Zou, 2013. "Threshold Preferences and the Environment," Working Papers hal-00850543, HAL.
    • Handle: RePEc:hal:wpaper:hal-00850543
    Note: View the original document on HAL open archive server: https://hal.science/hal-00850543
    as

    Download full text from publisher

    File URL: https://hal.science/hal-00850543/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
    2. Danny Campbell & W. Hutchinson & Riccardo Scarpa, 2008. "Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(3), pages 401-417, November.
    3. Marschak, T A, 1978. "On the Study of Taste Changing Policies," American Economic Review, American Economic Association, vol. 68(2), pages 386-391, May.
    4. Susie Lee & Ingmar Schumacher, 2011. "When does financial sector (in)stability induce financial reforms?," Working Papers hal-00637954, HAL.
    5. Schumacher, Ingmar & Zou, Benteng, 2008. "Pollution perception: A challenge for intergenerational equity," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 296-309, May.
    6. Prieur, Fabien & Bréchet, Thierry, 2013. "Can Education Be Good For Both Growth And The Environment?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(5), pages 1135-1157, July.
    7. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151.
    8. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
    9. Jouvet, Pierre-Andre & Michel, Philippe & Rotillon, Gilles, 2005. "Optimal growth with pollution: how to use pollution permits?," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1597-1609, September.
    10. Gelso, Brett R. & Peterson, Jeffrey M., 2005. "The influence of ethical attitudes on the demand for environmental recreation: incorporating lexicographic preferences," Ecological Economics, Elsevier, vol. 53(1), pages 35-45, April.
    11. Schumacher, Ingmar & Zou, Benteng, 2015. "Threshold preferences and the environment," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 17-27.
    12. Spash, Clive L., 2000. "Ecosystems, contingent valuation and ethics: the case of wetland re-creation," Ecological Economics, Elsevier, vol. 34(2), pages 195-215, August.
    13. Goulão, Catarina & Pérez-Barahona, Agustín, 2011. "Intergenerational transmission of non-communicable chronic diseases," TSE Working Papers 11-219, Toulouse School of Economics (TSE).
    14. Schumacher, Ingmar, 2009. "The dynamics of environmentalism and the environment," Ecological Economics, Elsevier, vol. 68(11), pages 2842-2849, September.
    15. John M. Gowdy, 1997. "The Value of Biodiversity: Markets, Society, and Ecosystems," Land Economics, University of Wisconsin Press, vol. 73(1), pages 25-41.
    16. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
    17. Nicholas Georgescu-Roegen, 1954. "Choice, Expectations and Measurability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 68(4), pages 503-534.
    18. Michael Lockwood, 1996. "Non‐Compensatory Preference Structures In Non‐Market Valuation Of Natural Area Policy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 40(2), pages 85-101, August.
    19. Thomas H. Stevens & Jaime Echeverria & Ronald J. Glass & Tim Hager & Thomas A. More, 1991. "Measuring the Existence Value of Wildlife: What Do CVM Estimates Really Show?," Land Economics, University of Wisconsin Press, vol. 67(4), pages 390-400.
    20. Lockwood, Michael, 1996. "Non-Compensatory Preference Structures In Non-Market Valuation Of Natural Area Policy," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(2), pages 1-17, August.
    21. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
    22. Harl E. Ryder & Geoffrey M. Heal, 1973. "Optimal Growth with Intertemporally Dependent Preferences," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(1), pages 1-31.
    23. Bisin, Alberto & Verdier, Thierry, 1998. "On the cultural transmission of preferences for social status," Journal of Public Economics, Elsevier, vol. 70(1), pages 75-97, October.
    24. Wan, Henry, 1970. "Optimal Saving Programs under Intertemporally Dependent Preferences," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 521-547, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karine Constant & Marion Davin, 2014. "Environmental Policy and Growth in a Model with Endogenous Environmental Awareness," AMSE Working Papers 1405, Aix-Marseille School of Economics, France, revised Mar 2014.
    2. Sichao Wei & David Aadland, 2021. "Pollution permits, green taxes, and the environmental poverty trap," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 1032-1052, May.
    3. Craig Bullock & Robert O'Shea, 2016. "Valuing environmental damage remediation and liability using value estimates for ecosystem services," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 59(9), pages 1711-1727, September.
    4. Asuka Oura & Yasukatsu Moridera & Koichi Futagami, 2018. "Lethal Effects of Pollution and Economic Growth: Efficiency of Abatement Technology," The Japanese Economic Review, Japanese Economic Association, vol. 69(2), pages 189-206, June.
    5. Schumacher, Ingmar & Zou, Benteng, 2015. "Threshold preferences and the environment," Journal of Mathematical Economics, Elsevier, vol. 60(C), pages 17-27.
    6. Aznar-Márquez, J. & Ruiz-Tamarit, J.R., 2017. "Sustainable growth and environmental catastrophes," Mathematical Social Sciences, Elsevier, vol. 89(C), pages 83-91.
    7. Fabien Prieur & Benteng Zou, 2017. "On the impact of indirect competition for political influence on environmental policy," DEM Discussion Paper Series 17-16, Department of Economics at the University of Luxembourg.
    8. Prieur, Fabien & Zou, Benteng, 2018. "Climate politics: How public persuasion affects the trade-off between environmental and economic performance," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 63-72.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:ipg:wpaper:15 is not listed on IDEAS
    2. repec:ipg:wpaper:2013-015 is not listed on IDEAS
    3. Schumacher, Ingmar, 2015. "The endogenous formation of an environmental culture," European Economic Review, Elsevier, vol. 76(C), pages 200-221.
    4. repec:ipg:wpaper:2013-013 is not listed on IDEAS
    5. repec:ipg:wpaper:13 is not listed on IDEAS
    6. Bezin, Emeline, 2015. "A cultural model of private provision and the environment," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 109-124.
    7. Spash, Clive L., 2000. "Ecosystems, contingent valuation and ethics: the case of wetland re-creation," Ecological Economics, Elsevier, vol. 34(2), pages 195-215, August.
    8. Lorenzo Cerda Planas, 2018. "Moving Toward Greener Societies: Moral Motivation and Green Behaviour," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(4), pages 835-860, August.
    9. Mattauch, Linus & Hepburn, Cameron & Stern, Nicholas, 2018. "Pigou pushes preferences: decarbonisation and endogenous values," INET Oxford Working Papers 2018-16, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    10. Karine Constant & Marion Davin, 2019. "Unequal Vulnerability to Climate Change and the Transmission of Adverse Effects Through International Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 727-759, October.
    11. Ponthiere, Gregory, 2016. "Pollution, unequal lifetimes and fairness," Mathematical Social Sciences, Elsevier, vol. 82(C), pages 49-64.
    12. Prieur, Fabien & Zou, Benteng, 2018. "Climate politics: How public persuasion affects the trade-off between environmental and economic performance," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 63-72.
    13. Jacobs Martin, 2016. "Accounting for Changing Tastes: Approaches to Explaining Unstable Individual Preferences," Review of Economics, De Gruyter, vol. 67(2), pages 121-183, August.
    14. Bezin, Emeline, 2013. "The dynamics of environmental concern and the evolution of pollution," Working Papers 207983, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    15. Campbell, Danny & Hutchinson, W. George & Scarpa, Riccardo, 2006. "Lexicographic Preferences in Discrete Choice Experiments: Consequences on Individual-Specific Willingness to Pay Estimates," Sustainability Indicators and Environmental Valuation Working Papers 12224, Fondazione Eni Enrico Mattei (FEEM).
    16. Panebianco, Fabrizio & Verdier, Thierry, 2017. "Paternalism, homophily and cultural transmission in random networks," Games and Economic Behavior, Elsevier, vol. 105(C), pages 155-176.
    17. Alberto Bisin & Thierry Verdier, 2010. "The Economics of Cultural Transmission and Socialization," Post-Print halshs-00754788, HAL.
    18. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris Nanterre, EconomiX.
    19. Mattauch, Linus & Hepburn, Cameron & Spuler, Fiona & Stern, Nicholas, 2022. "The economics of climate change with endogenous preferences," Resource and Energy Economics, Elsevier, vol. 69(C).
    20. Gowdy, John M. & Mayumi, Kozo, 2001. "Reformulating the foundations of consumer choice theory and environmental valuation," Ecological Economics, Elsevier, vol. 39(2), pages 223-237, November.
    21. repec:ipg:wpaper:7 is not listed on IDEAS
    22. Christoph, Inken B. & Peter, Guenter & Rothe, Andrea & Salamon, Petra & Weber, Sascha A. & Weible, Daniela, 2011. "School Milk Consumption in Germany - What are Important Product Attributes for Children and Parents?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114294, European Association of Agricultural Economists.
    23. Pichler, Michael, 2011. "The economics of cultural formation of preferences," Center for Mathematical Economics Working Papers 431, Center for Mathematical Economics, Bielefeld University.
    24. repec:ipg:wpaper:201407 is not listed on IDEAS
    25. Gelso, Brett R. & Peterson, Jeffrey M., 2005. "The influence of ethical attitudes on the demand for environmental recreation: incorporating lexicographic preferences," Ecological Economics, Elsevier, vol. 53(1), pages 35-45, April.
    26. Verdier, Thierry & Panebianco, Fabrizio, 2015. "Paternalism, Cultural Transmission and Diffusion on Complex Networks," CEPR Discussion Papers 10722, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Keywords: thresholds; endogenous preferences; environmental quality; policy intervention.; policy intervention;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00850543. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.