Elasticities of Demand and Willingness to Pay for Environmental Services in Sweden

Are environmental services luxuriesor necessities? Are low-income groupsrelatively more willing to pay forenvironmental improvements than high-incomegroups? The discussion on the shape of theenvironmental Kuznets curve and environmentaljustice call for analyses that approach thesequestions. Followin...

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Bibliographic Details
Published in:Environmental & resource economics 2003-11, Vol.26 (3), p.361-383
Main Authors: Hokby, Stina, Soderqvist, Tore
Format: Article
Language:English
Subjects:
Cost benefit analysis
demand for public goods
Economics
Elasticity of demand
Environment
Environmental justice
Environmental Kuznets curve
Environmental services
Estimates
Eutrophication
Income distribution
Income elasticity
Justice
Low income groups
Price elasticity
Public goods
Sensitivity analysis
Studies
Sweden
Utility functions
Valuation methods
Willingness to pay
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Summary:Are environmental services luxuriesor necessities? Are low-income groupsrelatively more willing to pay forenvironmental improvements than high-incomegroups? The discussion on the shape of theenvironmental Kuznets curve and environmentaljustice call for analyses that approach thesequestions. Following a survey-based approachfor modelling the demand for public goods, thispaper provides estimates of income and priceelasticities of demand for reduced marineeutrophication effects in the case of theBaltic Sea, using data from five Swedishcontingent valuation studies. Point estimatesindicate that reduced marine eutrophicationeffects can be classified as a necessity and anordinary and price elastic service. Confidenceintervals show however that the classificationas a necessity is not statisticallysignificant. Income elasticities of willingnessto pay, not to be confused with incomeelasticities of demand, are estimated for abroad range of environmental services inSweden. A basic finding is that income tends toinfluence willingness to pay positively andsignificantly. The elasticity estimates are inmost cases greater than zero, but less thanunity, indicating that the benefits ofenvironmental improvements tend to beregressively distributed. In a cost-benefitanalysis of a project suggesting environmentalimprovements, distributional concerns thereforecall for an introduction of weights or at leasta sensitivity analysis of how weighting wouldchange decisions about the project's socialprofitability. Copyright Kluwer Academic Publishers 2003
ISSN:0924-6460
1573-1502
DOI:10.1023/B:EARE.0000003581.97411.75