Agricultural & Resource Economics Theses and Dissertations
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Item EFFECTS OF FOOD PROCESSING METHODS ON PHENOLIC ACIDS AND ANTIOXIDANT CAPACITY IN SWEET CORN(2024) Dong, Fangxiang; Yu, Liangli; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This thesis research was designed to evaluate the effects of different food processing methods on the phenolic acid and antioxidant properties of sweet corn. Phenolic acids, such as ferulic acid and p-coumaric acid, are known for their health benefits. The research primarily focuses on two main stages of food processing: post-harvest handling and domestic cooking (boiling and steaming. These processes are evaluated to determine their impact on the soluble free, soluble conjugated, and insoluble bound forms of phenolic acids in sweet corn.Phenolic acids were analyzed by High-Performance Liquid Chromatography (HPLC). The study found that post-harvest handling significantly reduced the phenolic acid content, particularly in the insoluble bound form. Domestic cooking also led to notable reductions in phenolic content, though antioxidant activity, as measured by DPPH and ABTS assays, showed varying responses, sometimes increasing in treated samples. It was noted that different processing methods can induce structural changes that may either preserve or enhance the antioxidant properties. Furthermore, the results of this thesis explored optimal food processing techniques to maximize the retention of bioactive compounds, providing insights for better food preservation strategies.Item Increasing Charitable Giving Using Subsidies: Theory and Experiments(2024) Higgs, Zed; Uler, Neslihan; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation combines theoretical analysis with economic experiments to advance our understanding of why people give. In particular, this dissertation focuses on the use of subsidies for giving---e.g., rebates and matches---as a tool for increasing charitable giving. The research included in this dissertation provides important guidance to charitable organizations seeking to design fundraisers optimally to maximize charitable receipts. Furthermore, this research also provides important guidance to policy-makers seeking to better understand the interplay between tax policy and charitable giving. The results of this dissertation can contribute to more effective fundraising campaigns and more efficient tax policy. Chapter 1 challenges the well-established result among existing experimental studies that donations are significantly more responsive to matches than to rebates. In previous experimental studies the budget sets available to subjects under rebates are constrained relative to those available under matches, biasing estimates of the rebate-price elasticity. We conduct a novel experiment that removes the constraint under rebates, producing equal budget sets for price-equivalent rebates and matches. Contrary to previous studies, we find dramatically smaller differences in donations under price-equivalent matches and rebates. More importantly, we find no statistical difference between our estimated rebate- and match-price elasticities. Furthermore, we show that the constraint under rebates affects the entire distribution of observed behavior, not only the behavior of individuals for whom the constraint is binding. This chapter contributes to theories of charitable giving and has important implications for tax policy. Chapter 2 studies how donor uncertainty affects their response to match subsidies in the context of charitable giving. It explores whether donors are responsive to exogenous changes in the probability of receiving a match. I develop a theoretical model of giving that incorporates uncertainty around matches. I demonstrate the model is capable of explaining the discrepancies in match-price elasticities of giving observed across previous field experiments and observational studies. I then derive testable hypotheses from the model, and design and run an economic experiment to test these hypotheses. The results of my experiment provide clear evidence that donors are responsive to changes in the probability of receiving a match. As a result, the same donor may respond differently to match subsidies depending on the setting. This work identifies an important aspect of donor decision making, contributing to a better understanding of why people give. It has important implications for theories of giving, the optimal design of fundraisers, and tax policy. Chapter 3 builds on Chapter 2 to continue studying how donor uncertainty affects their response to match subsidies in the context of charitable giving. It explores whether donors are responsive to endogenous changes in the probability of receiving a match resulting from changes in fundraiser characteristics. The results provide strong evidence supporting the notion that changes in fundraiser characteristics can affect donors' beliefs about the probability of receiving a match, in turn affecting their donation decisions and the observed response to match subsidies. The effectiveness of a match subsidy varies depending on the characteristics of the fundraiser, so that the optimal fundraising strategy varies across fundraisers. This chapter provides new guidance for fundraisers interested in increasing charitable donations through the use of match subsidies.Item ESSAYS ON THE DESIGN AND EVALUATION OF PAYMENTS FOR ECOSYSTEM SERVICES PROGRAMS(2024) Kim, Youngho; Lichtenberg, Erik; Newburn, David; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Nature-based solutions for climate change mitigation and adaptation emphasize the restoration of natural infrastructure and the adoption of conservation practices in agriculture. Payment for ecosystem services (PES) programs play a key role in these efforts by offering financial incentives to farmers and landowners who adopt land use or management activities that provide environmental amenities and services for society. This dissertation consists of three chapters that examine the optimal design of PES programs and evaluate their performance in the context of climate change and environmental protection. The first chapter investigates whether PES programs contribute to climate change adaptation by reducing economic losses from extreme weather events. I evaluate the cost-effectiveness of the Conservation Reserve Enhancement Program (CREP) in the United States in mitigating flooded crop losses through the restoration of riparian buffers and wetlands. By leveraging variation in the timing of program introduction across counties in the Mississippi River Basin, I find that the introduction of CREP reduced both the number of flooded acres and the extent of damage on those acres. CREP also generated financial spillover effects on the federal crop insurance program, reducing indemnity payouts that would have otherwise been allocated to insured farmers. This study enhances our understanding of how PES programs promote sustainable agriculture and facilitate nature-based solutions for climate change adaptation. The second chapter examines the cost-effective structure of payments and penalties in PES programs, in collaboration with Erik Lichtenberg and David Newburn. The sustainability of ecosystem services programs is contingent on landowners’ compliance with the signed contracts after their initial participation. However, premature contract terminations are not uncommon, particularly when unexpected increases in crop prices lead to the removal of established conservation cover on agricultural land. In such cases, PES programs typically require participants to repay all payments received up to the date of contract termination (e.g., those in the US, the EU, Costa Rica, Mexico, Australia, and many other countries). This standard penalty structure is inefficient because it directly couples penalties with payments, increasing monotonically during the contract period. This study is the first to derive the optimal penalty structure that equals net environmental benefits for the remaining contract period, which decouples penalties from payments. A numerical policy simulation using integrated assessment models shows that the U.S. federal PES programs can substantially increase the environmental benefits by restructuring the current standard penalty. Importantly, the optimal penalty tends to decrease gradually during the contract period, providing credit to farmers for the ecosystem services generated prior to the contract termination. This finding has broad implications for restructuring PES programs in the U.S. and globally, and the study has been published in the Journal of Environmental Economics and Management. The third chapter examines the influence of U.S. federal agricultural conservation programs on the performance of emissions trading programs in promoting afforestation activities on agricultural land, in collaboration with Erik Lichtenberg, David Newburn, Haoluan Wang, and Derek Wietelman. Emissions trading programs, which pay for performance, have been advocated as flexible and efficient tools for achieving pollution reduction goals when evaluated in isolation. However, these programs often operate within a policy landscape dominated by conservation subsidy programs that pay for effort. We find that current federal conservation subsidies are so generous that they significantly crowd out water trading programs when both are in competition, although water trading programs would be effective in isolation. In addition, current carbon market payments for offsets are insufficient to make emissions trading programs more attractive compared to longstanding agricultural conservation subsidy programs. While prior studies have attributed low farmer participation in emissions trading programs to transaction costs and market uncertainty, our analysis suggests that even if these impediments are removed, competition with existing pay-for-effort programs would remain a significant barrier to expansion of emissions trading among agricultural producers. Therefore, the attractiveness and effectiveness of emissions trading programs for afforestation depend heavily on the presence and generosity of longstanding federal agricultural conservation subsidies.Item The Economics of Spruce Budworm Monitoring and Management in Eastern Canada(2024) Holm Perrault, Alexandre Ismaël Eliot; Olson, Lars J; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation uses techniques that were developed for renewable natural resource and invasive pest management to describe the two principal challenges of eastern spruce budworm (SBW) monitoring and management in Eastern Canada, with a specific focus on the province of Quebec. The primary empirical components of this dissertation can be found in Chapters 2 and 3. Chapter 1 provides the necessary historic, entomological, ecological and policy context to understand Chapters 2 and 3. Chapter 4 provides a conclusion to this dissertation by proposing extensions that would make the models presented in Chapters 2 and 3 more readily applicable to real-world spruce budworm management. These extensions involve making the models spatially explicit, as the models presented in Chapters 2 and 3 are spatially crude for the sake of tractability. Chapter 2 describes the management of an endemic irruptive forest pest and, using the spruce budworm-balsam fir forest interaction, proposes an optimization model that determines optimal pest treatment and forest harvest levels for a single, dimensionless forest stand that is currently undergoing an active budworm outbreak. Budworms cause both growth reductions and mortality on the forest biomass stock, and increasing forest biomass will provide budworms with more prey, causing their growth rate to increase. Treatment decisions are limited to three discrete possibilities (0, 1 or 2 on the landscape) that impose mortality on budworms, while harvests remove a proportion of the forest biomass. Using a numerical solution algorithm, we find that the optimal policy is generally to apply treatments over budworms and to harvest the forest at a sustainable rate, which confirms that the current management programs used in Eastern Canada are welfare-improving relative to letting an outbreak run its course. The time path for our baseline scenario indicates that budworms can be treated down to endemic levels quickly. Sensitivity analysis describes scenarios where budworm levels will rebound every year as well as scenarios where the optimal policy is to clearcut the forest as quickly as possible. Chapter 3 considers the pre-outbreak monitoring phase for spruce budworm management. This context is informed by the Early Intervention Strategy, a management practice that is currently being successfully employed in New Brunswick and other Maritime provinces. EIS requires extensive monitoring and proactive treatment. As such, we adapt a model known as CESAT to determine the locations for which EIS would yield positive net benefits in eastern Quebec. Under our baseline scenario, we find that EIS is optimal in some zones bordering New Brunswick, which indicates that EIS is unlikely to be welfare-improving over current management practices used in Quebec. Under different assumptions, however, we find that EIS is optimal across a much larger landscape, yielding millions of CAD net benefits over a thirty year horizon.Item SUBSIDIES FOR DOMESTIC TECHNOLOGY ADOPTION UNDER HETEROGENEOUS TREATMENT EFFECTS(2024) Lopez Aguilar, Javier Alejandro; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Governments and NGOs in developing countries offer subsidies to encourage the adoption of beneficial domestic technologies to generate positive externalities and improve access for poorer households. However, these subsidies may be mistargeted if the benefits come from the continued use of the technology, which is not guaranteed by its initial take-up. This dissertation examines the impact of a subsidy to promote the adoption of a rainwater harvesting (RWH) technology on the water restrictions residents of poor neighborhoods in Mexico City face. I explore this topic theoretically and empirically in three main chapters. In the first chapter, I outline a simple economic model of technology adoption and treatment effects. The model shows how exogenous changes to the subsidy can identify the treatment effects for different types of households, characterized by their willingness to pay (WTP) for the technology. To overcome the challenge of rare exogenous variation in subsidy rates and unobservable WTP, I propose the use of contingent valuation (CV) methods. These methods can exogenously generate variation in hypothetical subsidies and provide insights into the distribution of WTP in the relevant sample. The model is then completed by incorporating the CV information for empirical analysis. This approach may be valuable when randomized interventions are unfeasible due to institutional or budget constraints. In the second chapter, I empirically estimate the effects of the RWH Program in Mexico City on the time households spend obtaining water and the likelihood of postponing daily activities due to the lack of water. I employ the framework developed in the first chapter and local instrumental variable methods for the estimation. The data for this analysis was collected among all program participants in 2021 in partnership with the implementing agency. I find that the usage and causal effects of the RWH technology improve with the households' WTP. High-WTP households save 5 hours per week in water procurement time and reduce postponement of daily activities due to water scarcity by 25 percentage points. Conversely, low-WTP households are less likely to use the technology, yielding negligible benefits. The empirical analysis has significant policy implications. In the third chapter, I simulate counterfactual policies and show that adjusting the subsidy structure could enhance the average benefits of the RWH Program. Specifically, introducing enrollment fees that are a fraction of the total cost of the technology could consistently improve the average impact on recipients. These fees do not seem to disproportionately affect poorer households or those facing more stringent water restrictions, suggesting a potential avenue for policy refinement.Item ESSAYS IN CORPORATE SUSTAINABILITY(2024) Pi, Xueting; Epanchin-Niell, Rebecca; Smith, Cory; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation comprises three essays that examine various aspects of corporate environmental sustainability. Chapter 1 studies the impact of legal expertise in corporate leadership on improving corporate environmental sustainability performance by focusing on the role of general counsels (GC). Utilizing firm-level ESG data from 2002 to 2020 and employing probit model, while controlling for a host of firm characteristics, I find that firms with GCs in their top management teams are more likely to achieve better environmental performance, notably in emissions reduction. The relationship is robust to the models using peer firm GC ratio as an instrumental variable as well including industry fixed effects. However, these firms also tend to report higher greenhouse gas emissions, suggesting potential greenwashing. The improved environmental scores can be partially explained by GC firms establishing good awareness of climate change risk and opportunities as well as environmental training. In Chapter 2, an environmental regulation aiming energy consumption reduction is evaluated regarding the impacts on firm green innovation. In 2006, the Chinese central government introduced a policy mandating significant reductions in energy consumption by the top energy-consuming enterprises to achieve energy conservation objectives. This paper investigate the impact of this pivotal energy regulation aimed at the most energy-intensive Chinese manufacturers on their green innovation endeavors. Leveraging micro-level enterprise data and employing generalized difference-in-differences (DID) research designs, this study demonstrates that more stringent environmental regulation leads to a 2 to 4 percent increase in corporate green innovation. The findings remain robust across various alternative control groups and green innovation metrics. Chapter 3 investigates the interaction between wind energy development and biodiversity conservation. The rapid expansion of wind energy development represents significant progress towards achieving sustainable energy goals, but also can be accompanied by negative impacts on eagle fatal- ities and biodiversity. We investigate wind energy firms’ participation in golden eagle conservation, as represented by wind facilities’ choice to obtain an eagle incidental take permit. Under the US Eagle Protection Act, even unintentional take of golden eagles without an incidental take permit is illegal, and firms must mitigate or offset anticipated harm to obtain a permit. We combine theory and empirical analysis to explore the factors driving wind energy firms’ decisions on permitting. We find that golden eagle exposure and collision risk, as well as noncompliance detection likelihood and penalty intensity, positively influence firms’ permitting inclination. Current low rate of par- ticipation in permitting could be attributable to less intensive enforcement and the perception of low expected penalty costs for noncompliance compared to relatively high permitting costs.Item POLICY IMPACTS FOR DEVELOPMENT: EXAMPLES FROM A MARRIAGE LAW AND A LAND REFORM(2024) Chen, Ying; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This abstract outlines the chapters that form my doctoral dissertation. The first two chapters analyze the impacts of the 1974 Age-of-Marriage law in Indonesia, which aimed to curb child marriage.In the first chapter, I study the effectiveness of age-of-marriage laws. I discuss how age-of-marriage restrictions delay marriages and also affect the marriage market equilibrium, including not only when people marry but also who they marry. I build a theoretical model and illustrate graphically what happens when a law abruptly shifts the supply of marriageable brides and grooms. My model predicts that the age-of-marriage laws are expected to postpone first marriages universally. However, the extent of their impact on the marriage market varies depending on the strength of age-related preferences. In cases where individuals strongly favor a specific age gap between spouses, no marriage market effects are anticipated. Conversely, under weaker age-related preferences, the law alters matching in the marriage market and can affect bride prices, age gaps, or marriage rates. I then test some of those predictions with regression discontinuity estimates using birth cohort as the running variable. Using a large nationally-representative dataset, I estimate impacts of the Indonesian Law on age of marriage and probability of underage marriage for both women and men. In addition, I examine marriage-market effects by estimating impacts on the age gap between spouses as well as spouse education. My estimations based on large survey datasets support the notion that the marriage law delayed marriages and prevented under-age marriages, and also altered matching patterns, at least in the short run. Because the estimation in an RD design is complicated by the misreporting of birth dates, I deploy a range of robustness checks to bolster my findings. Though some of the robustness checks raise important caveats, my overall findings still suggest the law effectively delays marriage and alters matching in the marriage market. The second chapter further explores the effects of delaying marriage on life outcomes. I continue to rely on Indonesia’s Age-of-Marriage law and the same nationally representative dataset. I leverage a fuzzy regression discontinuity design to explore whether the law further brought about other commonly expected desirable outcomes of delayed marriage, such as higher education attainment, employment participation, health, wealth, and more. My results show that the law had a strong impact on girls education. It led to significant increases in all completion rates for girls, from primary school to bachelor degrees. This is consistent with some existing studies finding that delayed marriage can prevent girls from dropping out of school. I do not find similar impacts for men, for whom the marriageable age is 19. My results further do not suggest strong impacts on employment, but I significant positive effects on access to banking and communications, as well as health insurance. Echoing results from Chapter 1, I find strong impacts on spouse outcomes, suggesting that women who delayed their wedding married more educated and more successful men. The third chapter examines the land rental market effects of increased tenure security in the context of China’s land titling reform. Between 2009 and 2018, the Chinese government introduced a nationwide reform to register land titles for rural individual households in over 600,000 villages. To estimate the causal effect of the land reform, I leverage differences across villages induced by a pilot project of the reform conducted between 2009 and 2013. Estimates suggest that registering land titles for individual households led to a substantial increase in their participation in farmland rental markets, and allowed a shift towards non-kin tenants with a higher willingness to pay.Item Essays on Political Economy of Development in Latin America(2024) Angulo Santacruz, Juan Carlos; Battistin, Erich; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation is composed of three applied economics essays in the intersection of development economics and political economy. The first provides an economic explanation to the increase in the intensity of conflict. The second focuses on the effects of presence of illegal activities on educational outcomes. The third analyzes the effect of mass migration on voting behavior and political preferences. Chapter 1 studies how crime may be an unintended consequence of local development. The surge in global demand for Mexican avocados, particularly from the United States, has led to increased production and revenue in avocado-producing municipalities of Mexico. I show that these external changes in avocado global consumption patterns have influenced conflict levels in Mexico. Combining geographical variations in avocado cultivation suitability and fluctuations in avocado demand over time, I find a notable rise in homicides among agricultural workers in municipalities that are well-suited for avocado production. I demonstrate that this rise in homicides is not explained by the increased presence of drug cartels but rather heightened competition between cartels for resources in municipalities where avocados are produced. These findings suggest that cartels vie for territorial control, diversifying their income sources, including the avocado industry, in response to their relatively limited influence over drug markets and routes. In Chapter 2, I turn my attention to the production of illegal crops and how it affects schooling decisions. I focus on the case of Colombian coca leaves, the main input to produce cocaine. The country's main strategy to eradicate coca crops was the fumigation of herbicide until 2015, when the practice was banned. I exploit a plausible exogenous variation in the probability of being sprayed and the temporal effects of the fumigation campaigns as an instrument for the presence of coca fields. This temporal variation along with the cross-sectional variation of the spraying campaigns lead to an instrumental variable difference-in-differences. I use data on coca presence, eradication missions, and school outcomes at the municipal level from 2012 to 2018 to test whether a change in the presence of coca crops has an effect on schooling decisions. I show that my setting does not meet all the assumptions of the traditional difference-in-differences strategy but it fits those of Fuzzy Difference-in-Differences. My empirical findings suggest that an increase in the area cultivated with coca crops increases the high-school dropout rate and it has no effect on the enrollment rate. I rule out the possibility that coca presence crowds out other legal crops. Taken together, these results suggest that high school-age individuals are leaving school to work on coca related activities. In Chapter 3, I revisit the question on whether political preferences of voters are molded by the presence of migrants. I exploit the unanticipated inflow to Colombia of Venezuelans fleeing their home country's political crisis in 2016 and the onset of economic collapse. I compare the results of the 2018 presidential campaign in Colombia across municipalities with similar trends in electoral outcomes between 2002 and 2014 but different presence of Venezuelan migrants on the verge of the 2018 campaign. To address the spatial sorting of migrants across these municipalities, I construct an instrumental variable based on the distance from the closest ports of entry. I find that an increase in the presence of migrants in the municipality yielded a polarized voting behavior. I show that these effects are explained by an increase in the electoral turnout, and that the fondness of voters for Colombia's 2016 Peace Agreement Plebiscite was an important determinant of their behavior, which has been overlooked in past empirical work.Item Three Essays on Environmental Economics(2023) Beatty, Lauren; Linn, Joshua; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Oil and gas production is associated with numerous types of environmental damages and hazards. This dissertation is a collection of three essays which empirically examine how oil and gas production affects environmental outcomes, with a particular lens on avenues for policy to remediate these damages. In chapter 1, I focus on the joint relationship between drilling, building pipelines, and emissions. Most oil wells co-produce natural gas. Producers can choose to burn this valuable co-product on site (known as flaring) if the cost of connecting to the existing natural gas pipeline network is sufficiently high. I construct and estimate a dynamic model of producer drilling and flaring decisions which depend on the current state of the pipeline network and expectations over its evolution. My model also allows producers to internalize spillover effects for their neighbors -- any pipeline they build will extend the network and weakly decrease their neighbors' future pipeline connection costs. Using my model estimates, I simulate pipeline development and flaring outcomes under counterfactual policies. My counterfactual simulations show that flaring abatement costs are higher than previous studies but suggest that a flaring tax could substantially reduce flaring. A $\$5/$Mcf tax reduces flaring by $39\%$. In chapter 2, I focus on the non-point source pollution nature of methane emissions from oil and gas production. New scientific literature demonstrates that methane emissions from oil and gas production are a far larger problem than previously estimated. However, very little economics work has been conducted on this problem. Methane emissions are caused by leaked natural gas which escapes during the normal operation of equipment as well as leaks from faulty equipment. This implies that there are two avenues to abate emissions -- operators can install more efficient pumps and pneumatic devices, or they can expend more effort finding and fixing leaks from faulty equipment. In this chapter, I seek to understand how operators respond to prices on each margin using output from an inverse atmospheric modelling tool which outputs a gridded inventory of emissions. If producers primarily abate emissions through capital upgrades, then an input-based scheme where the regulator observes capital choices, then asses a tax on imputed emissions will be fairly efficient. I find that both channels of abatement are important, and that a tax on imputed emissions would achieve significantly less emissions reductions than an equivalent Pigouvian tax. Finally in chapter 3, I focus on policy options to deal with governmental liabilities from abandoned oil and gas wells. There are hundreds of thousands of aging oil and gas wells scattered throughout the United States that pose serious environmental and safety risks. These well sites will require billions of dollars of investment in remediation. When producers go bankrupt before remediation is complete, the responsibility to clean up the site often lands with either the state or federal government. These wells are known as orphan wells, and have received increasing attention in the scientific and policy literature. In this chapter, I estimate a model of well-level status transitions, then use my model to simulate how a policy requiring producers to either bring wells back into production or plug them after two years of inactivity would affect well orphan rates. I find that since many wells are left inactive for years at a time, this simple policy would be an effective way to decrease government plugging responsibilities and prevent environmental damage without dramatically reducing oil and gas production.Item Fifty Shades of Green - Essays on Eco-friendly Consumption, Public Policy, and Income Inequality(2023) Gutiérrez Mendieta, Aldo; Uler, Neslihan; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation offers a thorough examination of the impact of income inequality on environmental quality, with particular attention to the obstacles encountered by low-income individuals and families in adopting sustainable and environmentally friendly consumption practices. Through the development of a general theoretical model, I provide a novel approach on understanding the dynamics of this relationship. By examining various income inequality scenarios, I assess their effects on environmental quality. Based on these findings, I propose a policy recommendation that addresses both income inequality and environmental concerns. Additionally, I propose an innovative laboratory experiment to empirically validate the theoretical predictions of the general model.In Chapter 1 I present a brief introduction emphasizing the significance of examining the impact of income inequality on the environment. he importance of exploring the individual trade-offs associated with consuming environmentally friendly goods (referred to as 'green goods'), which are more expensive, compared to their environmentally harmful counterparts (referred to as 'brown goods'), which are cheaper to buy. Building upon this framework of green and brown goods, I introduce a general model in Chapter 2 to comprehend individual behavior and investigate the impact of income inequality on environmental quality. This theoretical model offers insights into why income inequality can lead to improved, worsened, or neutral outcomes for the environment, which provides an explanation for the mixed empirical evidence found in previous studies. In Chapter 3, I propose a solution to address the issues of income inequality and the externality generated by the consumption of brown goods simultaneously. I propose the implementation of a permit market in which a regulatory agency issues a limited number of permits to cap the total demand for brown goods, thereby preventing environmental quality from falling below a predetermined threshold. Consumers have the opportunity to trade these permits, enabling income transfers from buyers to sellers and ultimately reducing income inequality. Finally, in Chapter 4 I present the design and analysis of a novel laboratory experiment aimed at empirically testing the theoretical predictions derived from the model introduced in Chapter 2. The experimental results reveal a positive effect of income inequality on environmental quality across all treatments, contradicting the predicted negative effect in specific scenarios. To account for these deviations, I augment the theoretical model by integrating two behavioral motivations, which effectively elucidate the observed behavior. These extensions not only contribute to a deeper understanding of the empirical findings but also offer promising prospects for further research exploration.