new working paper: “The endogenous formation of an environmental culture”

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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!

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