Income Inequality and Willingness to Pay for Public Environmental Goods

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: We study how the distribution of income among members of society, and income inequality in particular, affects social willingness to pay (WTP) for environmental public goods. We find that social WTP for environmental goods increases with mean income, and decreases (increases) with income inequality if and only if environmental goods and manufactured goods are substitutes (complements). Furthermore, social WTP for environmental normally changes more elastically with mean income than with income inequality. We derive adjustment factors for benefit transfer to control for differences in income distributions between a study site and a policy site. For illustration, we quantify how social WTP for environmental public goods depends on the respective income distribution for empirical case studies in Sweden, China and the World. We find that the effects of adjusting for income inequality can be substantial. JEL-Classification: Q51, D63, H23, H43 Terms of use: Documents in

Environmental Inequality and Economic Valuation

“…I extend the homogenous public good model developed in Baumgärtner et al (2017a) to make it applicable to spatially heterogeneously distributed public goods. Consider a society that consists of a continuum of households.…”

“…So far, however, valuation studies have paid little attention to the implications of environmental inequalities and their (spatial) coupling with income inequalities (Drupp et al 2018). Recently, Baumgärtner et al (2017a) presented a model of how the distribution of income affects the societal value of a homogeneously distributed public good at the stage of aggregating individual values. For an equal preference model set-up in which all households are endowed with the same level of an environmental good but differ in exogenously given income, they find that societal willingness to pay (WTP) decreases (increases) with income inequality if and only if the environmental good is a substitute for (complement to) manufactured consumption goods.…”

“…I present a model of societal WTP for an environmental public good where households differ in both environmental good endowment and income. 2 Taking the homogenous public good model of Baumgärtner et al (2017a) as point of departure, I assume (a) households to have identical preferences regarding a manufactured private consumption good and an exogenously given environmental good represented by a constant elasticity of substitution (CES) utility function, and (b) differ in log-normally distributed household income. I extend their model to the case of heterogeneously distributed public goods by assuming (c) that households are heterogeneous in their endowment with a rationed environmental good, represented by a log-normal distribution.…”

On Scope Effects in Contingent Valuation: Does the Statistical Distributional Assumption Matter?

“…For information, we provide the descriptive statistics of income in both sub-samples in Table A.1 in the appendix. While income and its distribution could be drivers of WTP (Baumgärtner et al, 2017), there is no reason to think that it may impact scope. Indeed, mean income and income distribution in both sub-samples are not statistically different.…”

Intergenerational Discounting with Intragenerational Inequality in Consumption and the Environment

“…Some recent studies focus on how income inequality affects the willingness to pay for the environment(Baumgärtner et al 2017a;Drupp et al 2018a). 3 Empirical evidence is still mixed, butMilanovic (2016) finds that emerging "middle class" in Asian countries may have flattened global income distribution.…”