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Willingness to Pay for Environmental Quality: Testable Empirical Implications of the Growth and Environment Literature

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Abstract

Several different theoretical models of economic growth and environmental quality each generate inverse-U-shaped pollution-income paths, or "environmental Kuznets curves." They rely on different assumptions to generate the reversal of pollution trends, with correspondingly different policy implications. While the empirical implications for pollution are indistinguishable (by design), the models have distinct implications for the pattern of people's marginal willingness to pay (MWTP) for environmental improvements as a function of income. In this paper we demonstrate those different implications theoretically, and test for them empirically using data from the World Value Survey (WVS). We find strong relationships between MWTP and individual characteristics, such as age, income, and education, but little evidence that MWTP varies systematically with economic growth.

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  • Debra Israel & Arik Levinson, 2002. "Willingness to Pay for Environmental Quality: Testable Empirical Implications of the Growth and Environment Literature," Working Papers gueconwpa~02-02-09, Georgetown University, Department of Economics.
    • Handle: RePEc:geo:guwopa:gueconwpa~02-02-09
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    More about this item

    Keywords

    Earned World Values Survey; environmental Kuznets curve; environmental preferences.;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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