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

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Abstract

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.

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Authors and Affiliations

  1. Swedish National Road Administration, Solna, Sweden

    Stina Hökby

  2. The Royal Swedish Academy of Sciences, Beijer International Institute of Ecological Economics, Box 50005, SE-10405, Stockholm, Sweden

    Tore Söderqvist

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  1. Stina Hökby
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Correspondence to Tore Söderqvist.

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Hökby, S., Söderqvist, T. Elasticities of Demand and Willingness to Pay for Environmental Services in Sweden. Environmental and Resource Economics 26, 361–383 (2003). https://doi.org/10.1023/B:EARE.0000003581.97411.75

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