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

Author

Listed:
  • Edward S. Barbier

    (Department of Economics & Finance, University of Wyoming)

  • Mikołaj Czajkowski

    (Faculty of Economic Sciences, University of Warsaw)

  • Nick Hanley

    (University of St Andrews, School of Geography and Sustainable Development)

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.

Suggested Citation

  • Edward S. Barbier & Mikołaj Czajkowski & Nick Hanley, 2015. "Is the income elasticity of the willingness to pay for pollution control constant?," Working Papers 2015-07, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2015-07
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    More about this item

    Keywords

    Baltic Sea; benefit transfer; environmental Kuznets curve; eutrophication; income elasticity of willingness to pay; non-market valuation;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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