Global evidence on the income elasticity of willingness to pay, relative price changes and public natural capital values

Moritz A. Drupp, Zachary M. Turk, Ben Groom and Jonas Heckenhahn

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: While the global economy continues to grow, ecosystem services tend to stagnate or decline. Economic theory has shown how such shifts in relative scarcities can be reflected in project appraisal and accounting, but empirical evidence has been sparse to put theory into practice. To estimate relative price changes (RPCs) for ecosystem services to be used for making such adjustments, we perform a global meta-analysis of contingent valuation studies to derive income elasticities of marginal willingness to pay (WTP) for ecosystem services to proxy the degree of limited substitutability. Based on 735 income-WTP pairs from 396 studies, we find an income elasticity of WTP of around 0.6. Combined with good-specific growth rates, we estimate an RPC of ecosystem services of around 1.7% per year. In an application to natural capital valuation of forest ecosystem services by the World Bank, we show that natural capital should be uplifted by around 40%. Our assessment of aggregate public natural capital yields a larger value adjustment of between 58 and 97%, depending on the discount rate. We discuss implications for policy appraisal and for estimates of natural capital in comprehensive wealth accounts.

Keywords: contingent valuation; ecosystem services; forests; growth; income elasticity; limited substitutability; natural capital; relative prices; willingness to pay (search for similar items in EconPapers)
JEL-codes: D61 H43 Q51 Q54 Q58 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2025-11-19
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Published in Environmental and Resource Economics, 19, November, 2025. ISSN: 0924-6460

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