Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301323 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11197
Publisher: 
CESifo GmbH, Munich
Abstract: 
We study the heterogeneity of preferences regarding the limited substitutability of environmental public goods vis-a-vis private consumption goods and how it affects the economic valuation of environmental public goods. We show theoretically that mean marginal willingness to pay for an environmental public good decreases in society’s mean substitutability preference and increases in the heterogeneity of individual-level substitutability preferences. We then introduce an experimental framework to elicit individual-level substitutability preferences for the first time directly, which we apply to study general population preferences concerning the trade-off between market goods and forest ecosystem services. We estimate preference parameters for almost 1,500 individuals and document substantial preference heterogeneity. The majority of individual preferences imply a complementary relationship, with a median elasticity of substitution (complementarity) of around 0.4 (2.5). We show that accounting for heterogeneity in substitutability preferences may considerably increase the societal value attached to environmental public goods. These findings are relevant for environmental cost-benefit analysis and for the comprehensive accounting of public natural capital.
Subjects: 
substitutability
complementarity
heterogeneous preferences
non-market valuation
experiment
donations
public goods
policy appraisal
JEL: 
Q51
Q56
H41
D64
C99
Document Type: 
Working Paper
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