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new working paper

First – a little bit of history on this. In 2012, myself and two very nice co-authors, Luca Marchiori and Jean-Francois Maystadt, published a paper entitled “The impact of weather anomalies on migration in sub-Saharan Africa” in the Journal of Environmental Economics and Management. Some time later, our paper (the previous working paper version, but not much different to the published one) was put under fire in another article (Lilleør and Van den Broeck 2011). This paper suggested that income variability was omitted in our work which would thus bias our results.

We were a little surprised about this, since only our paper was addressed along these lines while clearly any article in this line of literature should also have been criticised long these lines. These critics spiced us up, motivated us to get back to our original work and re-think it with the criticisms that we received in mind. And so that we did. And then we saw the same thought coming up in a first draft of the new IPCC report, page 21 (by the way – read the report it is a nice one).

And now, exclusively for the readers here, we have a new paper discussing whether it makes sense to introduce income variability into these migration frameworks, study its role, and see whether there is really an omitted variable bias in our work or not. Find out about all this and more,  HERE. Enjoy!

Abstract:

It was recently suggested that the role of environmentally-induced income variability as a determinant of migration has been studied little to none. We provide a theoretical discussion and an overview of the empirical literature on this. We also extend a previous empirical study of ours by including income variability. Our findings lead us to acknowledge that income variability is a negligible driver of migration decisions at the macroeconomic level.

UPDATE (25 July 2013): Michael Oppenheimer just contacted us (me and my co-authors) and let us know that in the second draft of the IPCC report the criticism is taken out. Let us note that the critics of Lilleør and Van den Broeck were not wrong ex ante. In my opinion they simply tried to point out that in a microeconomic study the variable income variability was found to be important, while no macroeconomic study had picked up on this.

But if one then thinks more carefully – like we hopefully did in our new working paper – about the reasons for which macroeconomic studies should use income variability (instead of, or in conjunction with, the income level) as a determinant of migration, then the case for income variability seems shaky at most…

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.

Abstract:
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!

I have a new working paper out, it is entitled “An Empirical Study of the Determinants of Green Party Voting“. (download: ATP_5_2013)
In this paper I empirically study the determinants of individuals’ green voting behavior. I suggest that voting behavior is a less biased variable than commonly-used measures like willingness-to-pay and may be a better proxy for characterizing environmental attitudes. 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 the 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 find little role for demographic variables like sex, 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.

I’d be very happy about any comments! Private or public, give it a shot! Thanks!

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