environmental economics



There was an interesting panel discussion (Climate and energy policy after the Paris Agreement) at the excellent EAERE 2016 conference in Zurich with Scott Barrett (Columbia University), Lucas Bretschger (ETH Zurich), Thomas Sterner (University of Gothenburg) and Herman Vollebergh (Netherlands Environmental Assessment Agency and Tinbergen University), all four of whom have been widely involved in climate negotiations or research thereof. So I chased them up in order to get their views on what economists should do, or prepare for, to help make COP22 in Marrakesh successful.

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wordleI am happy to announce that my article entitled “Threshold Preferences and the Environment”, co-authored with Benteng Zou from the University of Luxembourg, has been accepted for publication in the Journal of Mathematical Economics. While the journal will publish a slightly shortened version of the article (without section 2), you can find the full version HERE. What is the paper about?

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I am happy to announce that my article “How Beliefs Influence the Willingness to Contribute to Prevention Expenditure” is forthcoming in the journal American Journal of Agricultural Economics. In this article I show the following:

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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!

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