Could the environment be a normal good for you and an inferior good for me? A theory of context-dependent substitutability and needs

Marion Dupoux and Vincent Martinet

Resource and Energy Economics, 2022, vol. 69, issue C

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 complements for satisfying different needs. Subsequently, the environment can switch between normal and inferior depending on one’s income and environment and corresponding prevalent needs. If the environment is inferior for some range of income, then the willingness to pay for environmental preservation becomes non-monotonic with respect to income. We discuss the relevance of our framework in the context of (income-adjusted) unit benefit transfers, dual-rate discounting and the Environmental Kuznets curve.

Keywords: Environment; Public goods; Context-dependent substitutability; Needs; Willingness to pay; Inferior goods (search for similar items in EconPapers)
JEL-codes: D11 H41 Q50 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:69:y:2022:i:c:s0928765522000331

DOI: 10.1016/j.reseneeco.2022.101316

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