Social discounting, inequality aversion, and the environment

Venmans, Frank ORCID: 0000-0002-4264-6606 and Groom, Ben ORCID: 0000-0003-0729-143X (2021) Social discounting, inequality aversion, and the environment. Journal of Environmental Economics and Management, 109. ISSN 0095-0696

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Abstract

Measures of inequality aversion are elicited using hypothetical decision tasks. The tasks require an assessment of projects in the presence of environmental inequalities across space and time. We also test the effect of different environmental domains (air pollution, recreational forest and soil fertility) and contextual framings (gain/loss, within/between regions and present–future/past–present inter-temporal trade-offs). Estimated mean inequality aversion is higher in the intra-temporal framing (an elasticity of 2.9), than in the inter-temporal framing with either negative (2.0) or positive (1.4) growth in environmental quality. Differences across environmental domains exist but are less pronounced. Similar results hold for pure time preference. Losses are associated with a lower pure rate of time preference but higher inequality aversion compared to gains. The results indicate how domain-specific ‘dual’ discount rates or rather changing relative shadow prices for the environment might be calibrated. Yet, seen as an exercise in empirical social choice, the context dependent results reject the classical Utilitarian formulation of a single Ramsey Rule.

Item Type:	Article
Official URL:	https://www.sciencedirect.com/journal/journal-of-e...
Additional Information:	© 2021 The Authors
Divisions:	Grantham Research Institute Geography & Environment
Subjects:	H Social Sciences > HB Economic Theory G Geography. Anthropology. Recreation
JEL classification:	D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions H - Public Economics > H4 - Publicly Provided Goods > H43 - Project Evaluation; Social Discount Rate D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
Date Deposited:	01 Jun 2021 13:54
Last Modified:	09 Nov 2024 03:54
URI:	http://eprints.lse.ac.uk/id/eprint/110739

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