Income Elasticity of Willingness to Pay for Better Air Quality: Effect of a Private Environmental Substitute

Jie He, Yue He and Bing Zhang

Land Economics, 2024, vol. 100, issue 3, 505-525

Abstract: We use a nested constant elasticity of substitution utility function to introduce a private environmental substitute in a theoretical model. We find that a buyer’s income elasticity of willingness to pay (WTP) increases with the price of the substitute and decreases with income. A higher price and a lower income also discourage purchase of the substitute, reducing the proportion of buyers in population. We must therefore consider both dimensions when discussing societal mean WTP. An empirical check based on a contingent valuation survey confirms our theoretical findings. Projected income-WTP curves reveal inequality further reduces the mean WTP in the presence of private environmental substitutes.

JEL-codes: Q51 Q53 (search for similar items in EconPapers)
Date: 2024
Note: DOI: https://doi.org/10.3368/le.100.3.022822-0018R2
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uwp:landec:v:100:y:2024:i:3:p:505-525

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