Income inequality and willingness to pay for environmental public goods

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.     

The Relationship between the Income Elasticities of Demand and Willingness to Pay

The relationship between income and willingness to pay for collectively provided public/environmental goods is investigated. We show that while the income elasticity of willingness to pay and the ordinary income elasticity of demand are related, knowledge of one is insufficient to determine the magnitude or even the sign of the other. The income elasticity of willingness to pay is influenced by additional factors which are generally unobservable. Examples are provided to illustrate the degree to which the two income elasticities may diverge. Our results indicate that even when goods are demand luxuries they may or may not have income elasticities of willingness to pay which are greater than one.     

Valuing high-seas ecosystem conservation

The high seas provide a variety of ecosystem services that benefit society. There have, however, been few attempts to quantify the human welfare impacts of changes to the delivery of these benefits. We assessed the values of several key ecosystem service benefits derived from protecting ecosystems in the high seas of the Flemish Cap through choice experiments conducted in Canada, Norway, and Scotland. Rather than solely eliciting public willingness to pay, we also explored the determinants of variance in the estimates of willingness to pay. We aimed to determine how much respondents were willing to pay for high-seas ecosystems conservation, which factors influence individuals’ willingness to pay, and whether individuals in Canada had a higher willingness to pay relative to those living in Norway and Scotland. This latter point captures distance-decay effects. On average, the public placed positive value on conserving high-seas ecosystems and on developing economic activities related to the exploitation and exploration of marine resources, despite a lack of awareness and familiarity with these environments. Distance-decay effects on willingness to pay were not clear. Scots had the highest willingness to pay and the Norwegians the lowest willingness to pay for all attributes, with the only exception being willingness to pay for a large increase in new jobs, in which case Canadians’ willingness to pay was higher than Scots’. The public's willingness to pay was influenced by sociodemographic characteristics and their perceptions of high-seas ecosystems. Our results provide evidence of the impacts of high-seas governance on human welfare and that improved governance could increase the value people place on high-seas ecosystems and the services they produce.     

环境物品的经济价值评估方法:条件价值法

系统地介绍了西方国家常用的１种评价环境物品（公共物品）的方法——条件价值法。在大量文献和作者已有研究的基础上,解释了环境物品的特征和价值含义,综述了条件价值法的概念、特点和总体框架内容,分析了该方法中出现的偏差类型,总结了该方法在国际国内的已有应用,提出其应用潜力和应用前景     

A Review of WTA/WTP Studies

Willingness to accept (WTA) is usually substantially higher than willingness to pay (WTP). These constructs have been studied for roughly 30 years and with a wide variety of goods. This paper reviews those studies. We find that the less the good is like an “ordinary market good,” the higher is the ratio. The ratio is highest for non-market goods, next highest for ordinary private goods, and lowest for experiments involving forms of money. A generalization of this pattern holds even when we account for differences in survey design: ordinary goods have lower ratios than non-ordinary ones. We also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive-compatible elicitation yields higher ratios.     

Critical environmental indicators: performance indices and assessment models for sustainable rural development planning

Sustainable development planning must be based on environmental and biophysical baseline indices that effectively define comparative development potential and environmental constraints. As such, indices must define the comparative advantage of the natural resource base and measure the fundamental capacity to sustain production rates of natural resource goods and services used to create societal well being. Complex biophysical and socioeconomic characteristics affect the identification and selection of sustainable development strategies. When derived from effective baseline indicators, indices may be used to define the spatial and temporal distribution of economically viable production opportunities and may be expressed in derived indices that realistically describe basic production opportunities and guide the selection of feasible, long-term development strategies. Specifically, representative indices are critical in the identification of development goals and realistic objectives and can be used to evaluate, select and implement sustainable development strategies and plans. It is stressed that the relevancy and effectiveness of public policies depend on the identification of representative evaluation models and baseline indices to define development strategies that are both environmentally sustainable and economically viable. In this context, the role of baseline indicators that define natural resource production capacities is discussed. This includes potential resource uses, derived benefits and their economic and environmental impacts. Key thematic indicators are suggested that may be especially useful in identifying development alternatives and impacts. This suggested that clearly defined environmental pollution limits or impact standards be used to define public risk tolerance limits and carrying capacity constraints. It is argued that these measures may be more effective in directing policy choices than economic valuation of non market goods and services that represent environmental externalities associated with resource exploitation options and economic development strategies. To this end, examples of thematic indicators and derived indices are introduced that may prove effective in resource assessment, economic evaluation and strategic development planning.     

Strategic investment in reputation

Although collective efforts are common in both animal and human societies, many human and probably animal social dilemmas have no obvious cooperative solution, which is a challenge for evolutionary biologists. In public goods games, i.e. the experimental paradigm for studying the sustainability of a public resource with human subjects, initial cooperation usually declines quickly. Recently, it has been shown that the interaction with another social game in which good reputation attracts help, can maintain a high level of cooperation in the public goods game. Here we show experimentally that humans use different strategies in the public goods game conditional on whether the player knows that his decisions will be either known or unknown in another social game. The knowledge of being recognized as the same individual in both scenarios motivates players to invest in their reputation and thus sustain the public resource. However, cooperation declines immediately when individual identities switch from being recognizable to being unrecognizable between the two interacting games.Communicated by M. Borgerhoff-Mulder     

An overview of the impacts of changes in common property resources management in the context of globalisation: A case study of India

Socio-economic development of mankind and well-being depend on the environment and the way in which development influences the environment. Thus, environment and development are interdependent. In fact, economic development is closely linked with the development of resources. These resources can be classified into three categories: public goods, semi-public goods (also known as common property resources) and private goods. In poor countries common property resources make a valuable contribution to the sustainable livelihoods of rural populations. The impact of globalisation on the commons shows various patterns of ownership, control, use and misuse. The commons were subjected to degradation as well as conservation in the process of centralized management in India. After the reform period, the administration of natural resources was given significant attention by specialized departments such as the Forest Department and the Revenue Department. All the land, apart from private land, was regarded as state property and controlled by the state. This paper highlights the need to examine the common property resources sector in the context of wider economic policy reform processes in the Indian economy.     

Personality and economic choices

There is substantial variation in individual preferences for public goods, yet much of that variation remains poorly understood. However, simple measures of personality can help to explain economic values and choices in a systematic way. In this paper, we examine the effects of personality on individual economic choices over public environmental goods. Based on three datasets from three separate stated preference studies, we use a hybrid choice econometric framework to examine the effects of personality on preferences for the status quo, changes in environmental quality, and costs of investing in environmental improvements. We find effects that are consistent across all datasets. Personality, a stable feature of an individual's character that is simple to measure, enriches explanations of why the demand for environmental goods varies across people, provides an indication of how different people are likely to react to the introduction of environmental policies, and explains substantial differences in Willingness to Pay.     

Valuing nature in a general equilibrium

We explore the consequences of modeling the demand for environmental quality improvements as a fully integrated part of a general equilibrium demand system in an applied general equilibrium (or CGE) analysis. Demand for non-market goods depends on a full range of relative prices as well as environmental outcomes. We simulate the effects of reducing two air pollutants to improve human health and three ecosystem services provided to households. The ecosystem services make non-separable contributions to household utility. We find that willingness to pay measures of use-based ecosystem services are impacted by changes in demand for complementary market goods. Demand for these goods shifts due to pollution reductions that enhance ecosystem services. Partial equilibrium estimates of these use values can be measured with substantial error if they fail to account for the general equilibrium adjustments caused by pollution. Over 300 calibrations of the model identify the model features important to these errors. We find that effects on ecosystem services associated with non-use values have important implications for the feedback effects on use related measures of economic tradeoffs. This is due to how our model integrates market and non-market effects, reflecting the non-market services importance to general equilibrium market outcomes.     

An integrated model of regional and local residential sorting with application to air quality

We examine the interconnectedness of demand for regionally and locally varying public goods using a residential sorting model. We propose a version of the model that describes household choices at the city (MSA) level and, conditional on city, the neighborhood (census tract) level. We use a two-stage budgeting argument to develop an empirically feasible sorting model that allows us to estimate preferences for regionally varying air quality while accounting for sorting at the local level. Our conceptual and empirical approach nests previous sorting models as special cases, allowing us to assess the importance of accounting for multiple spatial scales in our predictions for the cost of air pollution. Furthermore our preferred specification connects the city and neighborhood sorting margins to the upper and lower elements of a nested logit model, thereby establishing a useful correspondence between two stage budgeting and nested logit estimation. Empirically we find that estimates from a conventional model of sorting across MSAs imply a smaller marginal willingness to pay for air quality than estimates from our proposed model. We discuss how the difference is attributable in part to the omitted variable problems arising when tract level sorting is ignored.     

Die Rolle von Kommunikation in der Umweltbewertung

Goal and Scope

Planning projects concerning the environment often provoke problems due to a lack of transparency of the applied scales and the appropriate evaluation methods. This paper therefore examines the general structure of all valuation processes before describing the character of the economic evaluation method in detail. From this point of view, requirements on planning processes are coming out which are to be achieved if their duty — the provision of public goods — is to be carried out efficiently.

Features

It will be shown that from an economist’s perspective a planning procedure acts as a surrogate of the market in coordinating individual’s preferences. The reasons for the inefficient level of the provision of environmental goods by private producers are their main characteristics: non-rivality and non-excludability; therefore public goods do not possess prices. Thus environmental goods have to be produced by cooperation and planning processes have to guarantee this. The main character of planning procedures is be seen in communication processes which is documented by a narrative study.

Results and Conclusions

Planning projects concerning the environment are strongly contingent on communication processes. Thus, they are also controllable by communication. The interdisciplinary research in communications shows that cooperative behaviour which is required for planning projects that should provide public goods can be benefited by applicative communication technologies. In this juncture (social) norms more and more emerge to act an important part in conveying cooperative behaviour. Especially so called ‘Sozialtechniken’ seem to be able to activate such norms.

Outlook

From the economist’s point of view planning projects concerning the environment mostly desiderate two things: Firstly, the procedures and methods which are applied to evaluate the regarding environmental goods in many cases suffer from transparency. Secondly, individual’s preferences predominant by the local population and accordingly by the directly involved parties are mostly not acquired adequately to achieve an efficient allocation of environmental goods. Applying more communication technologies to solve these two problems in the future both an increase of efficiency and an increase of the acceptability of such planning projects can be expected.     

Reputation is valuable within and outside one’s own social group

To find conditions under which humans cooperate within groups of unrelated individuals has been of major interest in the behavioral sciences. The experimental paradigm for studying potential cooperation in social dilemmas is the public goods game. Here humans regularly fail to sustain a public resource cooperatively. However, the need to maintain good reputation for other social interactions, such as indirect reciprocity, has been identified as an effective mechanism to sustain cooperation in public goods situations. As a side effect of building a good reputation through cooperative actions, an individual provides direct benefits to members of his/her own social group. These benefits could be an incentive to reward a good reputation of group members. Here we show experimentally that building a good reputation through cooperative behavior in a public goods situation is rewarded in future social interactions, not only within ones own social group but also, at a similar level, in other social groups: humans regard cooperative behavior of others as an honest signal irrespective of past direct personal benefits. Reputation gained within as well as outside ones own social group can be a driving force for selfish individuals to cooperate in public goods situations, and thereby sustain any public resource.Communicated by T. Czeschlik     

Fiscal spending and the environment: Theory and empirics

During economic crises, governments often increase fiscal spending to stimulate the economy. While the fiscal spending surge may be temporary, spending composition is often altered in favor of expenditures on social programs and other public goods which may persist over time. We model and measure the impact of fiscal spending patterns on the environment. The model predicts that a reallocation of government spending composition towards social and public goods reduces pollution. However, increasing total government spending without altering its composition does not reduce pollution. We empirically test these predictions for air and water pollutants showing that they are fully supported.     

Measuring sustainable governance in the European Union

This paper examines the problem of measuring sustainable governance in the European Union (EU-27) through the use of duality and the Slutsky equation. The proposed methodology is based on the application of a three-dimensional optimisation model, where the arguments of the objective (sustainable social welfare) function are economic goods that contribute to sustainable economic growth; environmental goods that provide for sustainable environmental protection; and social goods through which sustainable social development is achieved. The dual problem, formulated through this three-dimensional theoretical model, is solved to find the optimal solution, indicating a certain sustainability level. We suggest that this solution can be used for calculating the value of what we define here as the sustainable governmental policy indicator, which is considered to provide quantitative measurement of government policies on sustainable development within the context of ‘good governance’. Furthermore, it is suggested that the Slutsky equation can be used as a reliable method for long-term monitoring and planning of national as well as international good governance with regard to sustainable development policies. In its empirical part, the paper applies the theoretical model in an analysis of the sustainable development indicators (as set out in the Sustainable Development Strategy (SDS) of the EU) in Bulgaria for the period 2000–2010 and compares them to those of the EU-27.     

Intertemporal and intergenerational Pareto efficiency

Efficiency conditions are derived for both private and public goods which provide benefits over time. In deriving these conditions, the paper extends the notion of efficiency to an intertemporal Pareto-optimal concept requiring the maximization of the ith individual's utility at a point of time subject to the constancy of his utility in all future periods and that of all other individuals during the relevant time span. By permitting births and deaths, a generalization of the basic model recasts the analysis into an intergenerational setting. Additional extensions involve learning by doing and perpetual public goods. The paper concludes that several of the conventional practices in public expenditure analysis do not conform to our definition of intertemporal Pareto efficiency.     

Which hedonic models can we trust to recover the marginal willingness to pay for environmental amenities?

The hedonic property value model is among our foremost tools for evaluating the economic consequences of policies that target the supply of local public goods, environmental services, and urban amenities. We design a theoretically consistent and empirically realistic Monte Carlo study of whether omitted variables seriously undermine the method’s ability to accurately identify economic values. Our results suggest that large gains in accuracy can be realized by moving from the standard linear specifications for the price function to a more flexible framework that uses a combination of spatial fixed effects, quasi-experimental identification, and temporal controls for housing market adjustment.     

Interpreting measures of economic loss: Evidence from contingent valuation and experimental studies

From the standpoint of conventional welfare theory, it is surprising that responses to contingent valuation studies of environmental goods have shown a consistent difference between willingness to pay and compensation demanded measures of economic loss. This paper examines these results in light of four reasons most often given as grounds for their dismissal. New experimental evidence supports an interpretation of the observed disparity in payment-and compensation-based measures as both real and psychologically meaningful. An alternative conceptual framework, suggested by prospect theory, is outlined and its relevance for economic assessments of potential environmental change is discussed briefly.     

A new meta-analysis on the WTP/WTA disparity

This study reports a new meta-analysis of papers that elicit willingness-to-pay (WTP) and willingness-to-accept compensation (WTA) measures of value for the same good. We investigate the effects of type of good and several survey-design features on the WTP/WTA disparity, measured as the logarithm of the ratio of mean WTA to mean WTP. Confirming Horowitz and McConnell?s (2002) pioneering meta-analysis, we find the disparity is smaller for ordinary private goods than for public and non-market goods, that it is not solely an artifact of using hypothetical transactions or other weak experimental or survey methods, and that it is smaller for studies using student subjects. In addition, we find that the disparity is smaller when subjects have experience valuing the good in real markets or through repeated experimental trials. In contrast to Horowitz and McConnell, we find the disparity is significantly smaller in studies using incentive-compatible elicitation mechanisms. The disparity is smaller in more recent studies, an effect that is attributable only in part to changes in study characteristics.     

Green clubs

This paper treats programs in which firms voluntarily agree to meet environmental standards as “green clubs”: clubs, because they provide non-rival but excludable reputation benefits to participating firms; green, because they also generate environmental public goods. The model illuminates a central tension between the congestion externality familiar from conventional club theory and the free-riding externality familiar from the theory on private provision of public goods. We compare three common program sponsors—governments, industry, and environmental groups. We find that if monitoring of the club standard is perfect, a government constrained from regulating club size may prefer to leave sponsorship to industry if public-good benefits are sufficiently low, or to environmentalists if public-good benefits are sufficiently high. If monitoring is imperfect, an important question is whether consumers can infer that a club is too large for its standard to be credible. If they can then the government may deliberately choose an imperfect monitoring mechanism as a way of regulating club size indirectly. If they cannot then this reinforces the government's preference for delegating sponsorship.