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

Marion Dupoux and Vincent Martinet

No 2019.08, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: Empirical evidence and theoretical frameworks mostly suggest normality of public environmental goods. In this paper, we argue there is no reason an environmental good should be categorized as inferior, normal or luxury in all decision contexts. We develop a model that allows public environmental goods to switch from one category to another, depending on individual income and environmental quality levels (i.e., the context). Our model is based on needs within which private consumption and environmental goods may interact differently (substitutes/complements). We formalize utility functional forms that comply with our framework. We finally derive some policy implications for environmental benefit transfers.

Keywords: substitutability; context; willingness to pay for the environment; inferior good; 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-env and nep-upt
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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http://faere.fr/pub/WorkingPapers/Dupoux_Martinet_FAERE_WP2019.08.pdf First version, 2019 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fae:wpaper:2019.08

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