PT  - JOURNAL ARTICLE
AU  - He, Jie
AU  - He, Yue
AU  - Zhang, Bing
TI  - Income Elasticity of Willingness to Pay for Better Air Quality: Effect of a Private Environmental Substitute
AID  - 10.3368/le.100.3.022822-0018R2
DP  - 2024 Aug 01
TA  - Land Economics
PG  - 505--525
VI  - 100
IP  - 3
4099  - http://le.uwpress.org/content/100/3/505.short
4100  - http://le.uwpress.org/content/100/3/505.full
AB  - We use a nested constant elasticity of substitution utility function to introduce a private environmental substitute in a theoretical model. We find that a buyer’s income elasticity of willingness to pay (WTP) increases with the price of the substitute and decreases with income. A higher price and a lower income also discourage purchase of the substitute, reducing the proportion of buyers in population. We must therefore consider both dimensions when discussing societal mean WTP. An empirical check based on a contingent valuation survey confirms our theoretical findings. Projected income-WTP curves reveal inequality further reduces the mean WTP in the presence of private environmental substitutes.