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Social Preferences and Environmental Externalities

Author

Listed:
  • Campos-Mercade, Pol

    (Department of Economics, Lund University)

  • Ek, Claes

    (University of Gothenburg, Department of Economics)

  • Söderberg, Magnus

    (Griffith University, Department of Accounting, Finance and Economics)

  • Schneider, Florian

    (University of Copenhagen, Department of Economics)

Abstract

Standard economic theory assumes that consumers ignore the externalities they create, such as emissions from burning fossil fuels and generating waste. In an incentivized study (N = 3, 718), we find that most people forgo substantial gains to avoid imposing negative externalities on others. Using administrative data on household waste, we show a clear link between such prosociality and waste behavior: prosociality predicts lower residual waste generation and higher waste sorting. Prosociality also predicts survey-reported pro-environmental behaviors such as lowering indoor temperature, limiting air travel, and consuming eco-friendly products. These findings highlight the importance of considering social preferences in environmental policy.

Suggested Citation

  • Campos-Mercade, Pol & Ek, Claes & Söderberg, Magnus & Schneider, Florian, 2025. "Social Preferences and Environmental Externalities," Working Papers 2025:6, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2025_006
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    More about this item

    Keywords

    social preferences; prosociality; environmental behaviors; externalities;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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