environmental economics

My article entitled “An Empirical Study of the Determinants of Green Party Voting” is now forthcoming in the journal Ecological Economics. In this article I show the following:

I empirically study the determinants of individuals’ green voting behavior. For this I make use of three datasets from Germany, a panel dataset and two cross-sectional datasets. The empirically strongest determinants are the voters’ attitude or distance to nuclear sites, the level of schooling and net income. I show that those voters with deviant attitudes or alternative world views are more likely to vote green, a result of the fact that the green party has always had the position of a protest party. I nd little role for demographic variables like gender, marital status or the number of children. This is in contrast to the stated preference literature. Age plays a role for explaining voting behavior only insofar
as it proxies for health.

You can find the version that is forthcoming HERE.


To environmental economists

So, according to TimeOut, apparently there are only 10 nice things one can do in Nice, France:

I’d like to take the opportunity and announce an 11th nice thing to do in Nice:
SAVE THE DAY: 7th and 8th July, 2014, conference in NICE, France.
Eric Strobl and I will organize a sub-event (Track 7) for environmental economists at this IPAG conference:

Would be great to meet you all there.
Please spread the word, save the day, and let us know whether you are interested!


In this new working paper I take a shot at trying to understand how agents with optimistic beliefs about environmental disasters/costs interact with agents holding pessimistic beliefs, if those two groups of agents need to decide about the optimal level of prevention expenditure. I analyze this in a static model, in a dynamic one, but also empirically. You can download the paper HERE. Please comment and give thoughts! Thanks!!

Here is the Abstract:

We study how beliefs affect individuals’ willingness to undertake  prevention  expenditure through a  two-type, N-person  public good game and test several results empirically. We show analytically that pessimistic agents will invest more in prevention expenditure than optimists. We should how pessimistic beliefs lead to a `double deprivation’ and discuss potential issues and remedies. The more optimistic the society the lower will be its total green expenditure. We also demonstrate how small differences in beliefs may induce substantial differences in type-related prevention expenditure. The more atomistic agents are the less they will contribute to the public good.

We then use a large international survey to study determinants of prevention expenditure. We proxy beliefs through three variables, namely science optimism, eco optimism and feelings of atomism. For each variable we find, as predicted by the theoretical model, a significant relationship with the willingness to undertake prevention expenditure. However, environmental education shapes these relationships. While environmental education does not affect the relationship between eco optimism and prevention expenditure, it leads to a stronger relationship between both science optimists, and those who feel atomistic, and prevention expenditure.

Finally, we develop a dynamic game with endogenous beliefs based on the static model and discuss the main differences in the optimal choices of the agents. We find that pessimistic agents have a higher prevention expenditure compared to the static case since they take the endogenous feedback of the prevention expenditure on their beliefs into account.

So today I present some new work that I did together with my co-author Benteng Zou from the Department of Economics at the University of Luxembourg. We have a previous work together on endogenous preferences and environmental economics, which you can find HERE and download HERE. We have kept interest in the role that endogenous preferences play for the environment, and our current article also studies this particular role. It is entitled “Threshold Preferences and the Environment“. What do we do? Here is the abstract:

In this article we study the implication of thresholds in preferences. To model this we extend the basic model of John and Pecchenino (1994) by allowing the current level of environmental quality to have a discrete impact on how an agent trades off future consumption and environmental quality. In other words, we endogenize the semi-elasticity of utility based on a step function. We motivate the existence of the threshold based on research from political science, from arguments based on regulation and standards, cultural economics as well as ecological economics.

Our results are that the location of the threshold determines both the potential steady states as well as the dynamics. For low (high) thresholds,  environmental quality converges to a low (high) steady state. For intermediate levels it converges to a stable p-cycle, with environmental quality being asymptotically bounded below and above by the low and high steady state. We discuss implications for intergenerational equity and policy making.

As policy implications  we study shifts in the threshold. Our results are that, in case it is costless to shift the threshold, it is always worthwhile to do so. If it is costly to change the threshold, then it is worthwhile to change the threshold if the threshold originally was sufficiently low. Lump-sum taxes may lead to a  development trap and should be avoided if there are uncertainties about the threshold or the effectiveness of the policy.

If you are interested, you can download our new paper HERE. Please feel free to think, discuss and comment, openly or privately. We are happy about any discussion. Enjoy!

HERE is a new working paper I wrote together with Georg Müller-Fürstenberger, Professor at University of Trier, Germany. In this theory paper we build a two-country model with an international externality. This is the abstract:

We develop an overlapping generations general equilibrium model with two regions. Only one of the regions is subject to an international environmental externality. We find that regions that are too poor to sufficiently offset the international externality imposed upon them may be stuck in a poverty trap. International capital markets eliminate this trap. However, regions that are not in the trap are likely to experience long-run welfare losses when capital markets are integrated compared to the autarky case. This suggests that poor and small regions fare better with integrated capital markets while rich regions, or those regions able to sufficiently impact their environmental quality, should not integrate capital markets for environmental reasons alone.

So basically the storyline is that one player/country/region can harm another player/country/region through a negative externality, and this externality may hinder or even stop the economic development of that player/country/region. For example, take climate change and rising sea levels. Rich countries with large emissions impose the negative externality of climate change upon regions like sub-Saharan Africa, or countries like Bangladesh (through sea level rise). In order to reduce the impact of that externality those regions need to spend large amounts of money that hinder or stop their economic development. However, if capital markets get integrated between both regions, the one affecting and the other being affected, then investors will make use of the interest rate differential, more capital will flow from the rich to the poor region, and thus there’ll be a potential economic takeoff and further development out of the trap. We call that trap the environmental poverty trap.

UPDATE 10 March 2016: We worked over the paper again and you can find the new version HERE.


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I have worked hard and finally here it is, a new working paper entitled “The endogenous formation of an environmental culture“. You can download the paper HERE. I have always been interested in studying the role of preference formation for environmental issues, and this new work is more strongly focused on environmental culture formation. In my opinion, the role of the preferences and their potential endogeneity to the states of nature has seen little to no analysis in the environmental economics literature. However, it should definitely be viewed as equally important as aspects of e.g. technological change or political ones.

We develop an overlapping generations model with environmental quality and endogenous environmental culture. Based upon empirical evidence, preferences over culturally-weighted consumption and environmental quality are assumed to follow a Leontieff function. We find that four different regimes may be possible, with interior or corner solutions in investments in environmental culture and maintenance. Depending on the parameter conditions, there exists one of two possible, asymptotically stable steady states, one with and one without investments in environmental culture.

For low wealth levels, society is unable to free resources for environmental culture. In this case, society will only invest in environmental maintenance if environmental quality is sufficiently low. Once society has reached a certain level of economic development, then it may optimally invest a part of its wealth in developing an environmental culture. Environmental culture has not only a positive impact on environmental quality through lower levels of consumption, but it improves the environment through maintenance expenditure for wealth-environment combinations at which, in a restricted model without environmental culture, no maintenance would be undertaken. Environmental culture leads to a society with a higher indirect utility at steady state in comparison to the restricted model.

Our model leads us to the conclusion that, by raising the importance of environmental quality for utility,  environmental culture leads to lower steady state levels of consumption and wealth, but higher environmental quality.  Thus, for societies trapped in a situation with low environmental quality, investments in culture may induce positive feedback loops, where more culture raises environmental quality which in turn raises environmental culture. We also discuss how environmental culture may lead to an Environmental Kuznets Curve.

As always, comments are more than warmly welcome. Thank you!

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