Income inequality and willingness to pay for environmental public goods

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 decreases (increases) with income inequality if and only if environmental goo...

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Bibliographic Details
Published inJournal of environmental economics and management Vol. 85; pp. 35 - 61
Main Authors Baumgärtner, Stefan, Drupp, Moritz A., Meya, Jasper N., Munz, Jan M., Quaas, Martin F.
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.09.2017
Subjects
Benefit transfer
Environmental goods
Income distribution
Inequality
Public goods
Sustainability policy
Willingness to pay
Environmental goods
Income distribution
Sustainability policy
Benefit transfer
Public goods
Willingness to pay
Inequality
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Summary: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 decreases (increases) with income inequality if and only if environmental goods and manufactured goods are substitutes (complements). 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 distributions for empirical case studies in Sweden and the World at large. We find that the adjustment for income inequality can be substantial.
ISSN:0095-0696
1096-0449
DOI:10.1016/j.jeem.2017.04.005