Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2014:6: Relative income and the WTP for public goods - A case study of forest conservation in Sweden

Thomas Broberg ()
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Thomas Broberg: Centre for Environmental and Resource Economics, Umeå University, Sweden

Abstract: The main objective with this paper is to test the hypothesis that peoples stated WTP for an environmental public good (old growth forest in Sweden) are sensitive to the respondents’ relative income. To do that I use an experimental valuation question in a split-sample setting, conditioning the respondents on hypothetical changes in their absolute and relative income. The results indicate that the relevant income measure may not only be the income level per se, but also the income level relative to others. People with green attitudes and males react more strongly to changes in their relative position than others. The results stress that growth in incomes may not be a guaranty for growth in WTP, the distribution of growth also matter.

Keywords: contingent valuation; income-effect; social responsibility; relative income

JEL-codes: C81; D12; D31; D64; Q20

18 pages, September 9, 2014

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