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

L'environnement pourrait-il être un bien normal pour vous et un bien inférieur pour moi ? Une théorie de la substituabilité dépendante du contexte et des besoins

Marion Dupoux and Vincent Martinet

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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-dependant substituability; Need; Willingness to Pay; Inferior good (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-agr, nep-dcm, nep-ene and nep-env
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03693920v1
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Published in Resource and Energy Economics, 2022, 69, 20 p. ⟨10.1016/j.reseneeco.2022.101316⟩

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Journal Article: Could the environment be a normal good for you and an inferior good for me? A theory of context-dependent substitutability and needs (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03693920

DOI: 10.1016/j.reseneeco.2022.101316

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