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

Marion Dupoux () and Vincent Martinet
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Marion Dupoux: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden, https://economics.gu.se/

No 759, Working Papers in Economics from University of Gothenburg, Department of Economics

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.

Keywords: substitutability; environmental public goods; context; willingness to pay; inferior goods; needs (search for similar items in EconPapers)
JEL-codes: D11 H41 Q50 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-04
New Economics Papers: this item is included in nep-dcm and nep-env
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Citations: View citations in EconPapers (2)

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Working Paper: Can the environment be an inferior good ? A theory with context-dependent substitutability and needs (2019)
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