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Can the environment be an inferior good? A theory with context-dependent substitutability and needs

Author

Listed:
  • Dupoux, Marion

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Martinet, Vincent

    (Economie Publique, AgroParisTech, INRA, University of 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 com-plements for satisfying different needs. Subsequently, the environment can switch between normal and inferior depending on one’s income and environment. If the environment is in-ferior for some range of income, then the willingness to pay for environmental preservation becomes non-monotonic, thereby having implications for benefit transfers.

Suggested Citation

  • Dupoux, Marion & Martinet, Vincent, 2019. "Can the environment be an inferior good? A theory with context-dependent substitutability and needs," Working Papers in Economics 759, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0759
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    File URL: http://hdl.handle.net/2077/60061
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    Cited by:

    1. Victor Champonnois & Olivier Chanel, 2023. "Accounting for subsistence needs in non-market valuation: a simple proposal," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 66(5), pages 1037-1060, April.

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    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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