How Does a “Green” Good Affect Environmental Quality and Social Welfare?

Brumme Anja ()
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Brumme Anja: Technische Universität Bergakademie, Freiberg, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2022, vol. 242, issue 3, 371-401

Abstract: In this paper an impure public good model is applied to analyze the effects of introducing a green good, i.e. a consumption good that contributes to preservation of environmental quality. I distinguish three types of consumers: “grays”, who consume the green good and a private good; “greens”, who consume the green good and make additional donations to environmental organizations; and “edge” consumers, who consume only the green good. With respect to environmental quality I find that the gap between voluntary provision and optimal provision is unaffected by the introduction of the green good, no matter if consumers are gray or green. However, in the case of gray agents environmental quality is improved in absolute terms after the green good has been launched whereas it remains at the same level as before if consumers are green. The effect of the green good on the social welfare gap is more likely to be beneficial if agents are gray. The gaps with respect to environmental quality and social welfare are both closed if the agents are edge consumers.

Keywords: environmental quality; equivalent variation; green goods; impure public goods; index of easy riding; Pareto-optimum; social welfare; voluntary provision of public goods (search for similar items in EconPapers)
JEL-codes: C72 D64 H41 Q50 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:242:y:2022:i:3:p:371-401:n:1

DOI: 10.1515/jbnst-2021-0016

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