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Is the income elasticity of the willingness to pay for pollution control constant?

Edward Barbier (), Mikolaj Czajkowski () and Nick Hanley ()

No 2015-07, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions, which are not necessary for an environmental Kuznets curve relationship between pollution and income. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1 - 0.2 for low-income respondents and 0.6 - 0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant and always less than one.

Keywords: Baltic Sea; benefit transfer; environmental Kuznets curve; eutrophication; income elasticity of willingness to pay; non-market valuation (search for similar items in EconPapers)
JEL-codes: Q51 Q53 Q56 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-dcm, nep-ene, nep-env and nep-res
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

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http://www.wne.uw.edu.pl/index.php/download_file/1542/ First version, 2015 (application/pdf)

Related works:
Journal Article: Is the Income Elasticity of the Willingness to Pay for Pollution Control Constant? (2017) Downloads
Working Paper: Is the income elasticity of the willingness to pay for pollution control constant? (2015) Downloads
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