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Income inequality and willingness to pay for environmental public goods

Stefan Baumgärtner, Moritz Drupp (), Jasper N. Meya, Jan M. Munz and Martin Quaas

Journal of Environmental Economics and Management, 2017, vol. 85, issue C, 35-61

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 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.

Keywords: Environmental goods; Public goods; Income distribution; Inequality; Willingness to pay; Benefit transfer; Sustainability policy (search for similar items in EconPapers)
Date: 2017
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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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