Threshold Preferences and the Environment
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 sufficiently low. Lump-sum taxes may lead to a development trap and should be avoided if there are uncertainties about the threshold or the effectiveness of the policy.
|Date of creation:||15 May 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 1 53 63 36 00
Web page: http://www.ipag.fr
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schumacher, Ingmar, 2009.
"The dynamics of environmentalism and the environment,"
Elsevier, vol. 68(11), pages 2842-2849, September.
- Ingmar Schumacher, 2009. "The dynamics of Environmentalism and the Environment," Working Papers hal-00392379, HAL.
- 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.
- 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(02), August.
- repec:cup:cbooks:9780521001151 is not listed on IDEAS
- Danny Campbell & W. George Hutchinson & Riccardo Scarpa, 2007.
"Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments,"
Working Papers in Economics
07/18, University of Waikato, Department of Economics.
- Danny Campbell & W. Hutchinson & Riccardo Scarpa, 2008. "Incorporating Discontinuous Preferences into the Analysis of Discrete Choice Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 41(3), pages 401-417, November.
- Bisin, A. & Verdier, T., 1997.
"The Economics of Cultural Transmission and the Dynamics of Preferences,"
DELTA Working Papers
97-03, DELTA (Ecole normale supérieure).
- 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.
- Goulão, Catarina & Pérez-Barahona, Agustín, 2011. "Intergenerational transmission of non-communicable chronic diseases," TSE Working Papers 11-219, Toulouse School of Economics (TSE).
- 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.
- BRECHET, Thierry & PRIEUR, Fabien, 2009.
"Can education be good for both growth and the environment?,"
CORE Discussion Papers
2009019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Prieur, Fabien & Bréchet, Thierry, 2013. "Can Education Be Good For Both Growth And The Environment?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(05), pages 1135-1157, July.
- 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, 08.
- Bisin, A. & Verdier, T., 1997.
"On the Cultural Transmission of Preferences for Social Status,"
DELTA Working Papers
97-04, DELTA (Ecole normale supérieure).
- 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.
- Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2004.
"Optimal growth with pollution : how to use pollution permits ?,"
Cahiers de la Maison des Sciences Economiques
v04012, Université Panthéon-Sorbonne (Paris 1).
- 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.
- Marschak, T A, 1978. "On the Study of Taste Changing Policies," American Economic Review, American Economic Association, vol. 68(2), pages 386-91, May.
- Susie Lee & Ingmar Schumacher, 2011. "When does financial sector (in)stability induce financial reforms?," Working Papers hal-00637954, HAL.
- 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.
- Catarina Goulao & Agustin Pérez-Barahona, 2012. "Intergenerational transmission of non-communicable chronic diseases," Working Papers hal-00690325, HAL.
- 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.
- 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.
- John M. Gowdy, 1997. "The Value of Biodiversity: Markets, Society, and Ecosystems," Land Economics, University of Wisconsin Press, vol. 73(1), pages 25-41.
- 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.
- 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 521-47, October.
When requesting a correction, please mention this item's handle: RePEc:ipg:wpaper:2013-015. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ingmar Schumacher)
If references are entirely missing, you can add them using this form.