Income effects and the inconvenience of private provision of public goods for bads: The case of recycling in Finland

a r t i c l e i n f o Absent or weak income effects reported in many contingent valuation studies have cast doubt on the reliability of the survey method. We find that the income effect depends on the type of public good in question: there is a negative income effect for willingness to pay for recycling, which requires time and effort for sorting, but a positive effect for the more convenient incineration. Hence, high-income (low-income) individuals may display less (more) effort on environmental behavior. This stresses the importance of comprehensive distributional analyses when assessing alternative environmental policies. Environmental policy always involves distributional issues. There is empirical evidence that the benefits of publicly provided environmental goods accrue to high-income households (see, e. have shown that environmental policy based on economic instruments (fees, taxes, and permits) can be regressive. Mitigating negative environmental impacts may not mean only increased direct costs but may require changes in behavior and consumption patterns as well. For example, the purpose of charges on CO 2 emissions is to promote energy saving and to change environmental behavior permanently. Changing consumption patterns may require increased efforts in terms of time and inconvenience. If the old saying " time is money " is true, then it is no longer self-evident whose (opportunity) cost of time, effort or inconvenience is largest and who loses most due to environmental policy. Analysis of distributional impacts requires evaluation of actual and contingent contributions to public goods. This has traditionally been done in the environmental economics literature by employing surveys of " stated preference " methods (e.g. contingent valuation), or drawing on " revealed preference " data on willingness to pay (WTP) for a cleaner environment (e.g. the hedonic pricing method) (Haab and McConnell, 2002). These methods have also been used for classifying environmental goods as normal or luxury goods. In this context, the weak income effects for WTP reported in many empirical contingent valuation (CV) studies have prompted criticism of the reliability of the method (Diamond and Hausman, 1994). Flores and Carson (1997) have informed the controversy by showing that the income elasticities of demand and WTP are fundamentally different in that WTP is conditioned on a given quantity change. Yet, insignificant income effects are often considered problematic for the reliability of CV estimates in practice. For example, Schläpfer (2006) investigated income effects in a meta-analysis of over 60 empirical CV …