RT Journal Article
SR Electronic
T1 Income Elasticity of Willingness to Pay for Better Air Quality
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 022822-0018R2
DO 10.3368/le.100.3.022822-0018R2
A1 He, Jie
A1 He, Yue
A1 Zhang, Bing
YR 2024
UL http://le.uwpress.org/content/early/2024/01/18/le.100.3.022822-0018R2.abstract
AB We use a nested CES utility function to introduce a private environmental substitute in a theoretical model. We found that buyer’s income elasticity of WTP increases with price of the substitute and decreases with income. Meanwhile, a higher price and a lower income also discourage purchase of the substitute, reducing the proportion of buyers in population. We therefore need to consider both dimensions while discussing societal mean WTP. An empirical check based on a contingent valuation survey confirms our theoretical findings. The projected income-WTP curves reveal inequality reduces the mean WTP more in the presence of private environmental substitutes.