IDEAS home Printed from https://ideas.repec.org/p/zbw/cawmdp/117.html
   My bibliography  Save this paper

Negative income shocks and the support of environmental policies: Insights from the COVID-19 pandemic

Author

Listed:
  • Löschel, Andreas
  • Price, Michael
  • Razzolini, Laura
  • Werthschulte, Madeline

Abstract

This study explores whether negative income shocks from the COVID-19 pandemic affect the demand for environmental policy. By running a survey in Germany in May 2020, we show that there is a large and negative correlation between the COVID-19 income shocks and the willingness to support green policies. Importantly, this relation is separate from the effect of long-run income. Building on this first evidence, our study provides directions for future valuation studies. Specifically, our results provide a proof of concept that welfare analyses based on willingness-to-pay estimates to assess the benefit of an environmental good or the cost of an environmental damage may be downward biased if temporary changes in income are not considered.

Suggested Citation

  • Löschel, Andreas & Price, Michael & Razzolini, Laura & Werthschulte, Madeline, 2020. "Negative income shocks and the support of environmental policies: Insights from the COVID-19 pandemic," CAWM Discussion Papers 117, University of Münster, Münster Center for Economic Policy (MEP).
    • Handle: RePEc:zbw:cawmdp:117
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/219994/1/1701961873.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jack L. Knetsch & J. A. Sinden, 1984. "Willingness to Pay and Compensation Demanded: Experimental Evidence of an Unexpected Disparity in Measures of Value," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 507-521.
    2. Hunt Allcott & Dmitry Taubinsky, 2015. "Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market," American Economic Review, American Economic Association, vol. 105(8), pages 2501-2538, August.
    3. Coibion, Olivier & Gorodnichenko, Yuriy & Weber, Michael, 2020. "The Cost of the COVID-19 Crisis: Lockdowns, Macroeconomic Expectations, and Consumer Spending," Department of Economics, Working Paper Series qt4jn1x65h, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    4. Melvin Stephens Jr., 2003. ""3rd of tha Month": Do Social Security Recipients Smooth Consumption Between Checks?," American Economic Review, American Economic Association, vol. 93(1), pages 406-422, March.
    5. Dmitry Taubinsky & Alex Rees-Jones, 2018. "Attention Variation and Welfare: Theory and Evidence from a Tax Salience Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(4), pages 2462-2496.
    6. Fredrik Carlsson & Mitesh Kataria & Alan Krupnick & Elina Lampi & Åsa Löfgren & Ping Qin & Susie Chun & Thomas Sterner, 2012. "Paying for Mitigation: A Multiple Country Study," Land Economics, University of Wisconsin Press, vol. 88(2), pages 326-340.
    7. Alexander W. Bartik & Marianne Bertrand & Zoë B. Cullen & Edward L. Glaeser & Michael Luca & Christopher T. Stanton, 2020. "How Are Small Businesses Adjusting to COVID-19? Early Evidence from a Survey," NBER Working Papers 26989, National Bureau of Economic Research, Inc.
    8. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-2553, October.
    9. Nicholas S. Souleles & Jonathan A. Parker & David S. Johnson, 2006. "Household Expenditure and the Income Tax Rebates of 2001," American Economic Review, American Economic Association, vol. 96(5), pages 1589-1610, December.
    10. Melvin Stephens Jr., 2002. "Paycheck Receipt and the Timing of Consumption," NBER Working Papers 9356, National Bureau of Economic Research, Inc.
    11. Hunt Allcott & Judd B. Kessler, 2019. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 236-276, January.
    12. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2018. "Behavioral Household Finance," NBER Working Papers 24854, National Bureau of Economic Research, Inc.
    13. Johannes Diederich & Timo Goeschl, 2014. "Willingness to Pay for Voluntary Climate Action and Its Determinants: Field-Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 405-429, March.
    14. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    15. Berrens, Robert P. & Bohara, Alok K. & Jenkins-Smith, Hank C. & Silva, Carol L. & Weimer, David L., 2004. "Information and effort in contingent valuation surveys: application to global climate change using national internet samples," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 331-363, March.
    16. Edward B. Barbier & Mikołaj Czajkowski & Nick Hanley, 2017. "Is the Income Elasticity of the Willingness to Pay for Pollution Control Constant?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(3), pages 663-682, November.
    17. James J. Heckman, 2010. "Building Bridges between Structural and Program Evaluation Approaches to Evaluating Policy," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 356-398, June.
    18. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    19. MacKerron, George J. & Egerton, Catrin & Gaskell, Christopher & Parpia, Aimie & Mourato, Susana, 2009. "Willingness to pay for carbon offset certification and co-benefits among (high-)flying young adults in the UK," Energy Policy, Elsevier, vol. 37(4), pages 1372-1381, April.
    20. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-270, March.
    21. Löschel, Andreas & Sturm, Bodo & Uehleke, Reinhard, 2013. "Revealed preferences for climate protection when the purely individual perspective is relaxed: Evidence from a framed field experiment," ZEW Discussion Papers 13-006, ZEW - Leibniz Centre for European Economic Research.
    22. Reinhard Uehleke & Bodo Sturm, 2017. "The Influence of Collective Action on the Demand for Voluntary Climate Change Mitigation in Hypothetical and Real Situations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(3), pages 429-454, July.
    23. Sumedha Gupta & Laura Montenovo & Thuy Nguyen & Felipe Lozano‐Rojas & Ian Schmutte & Kosali Simon & Bruce A. Weinberg & Coady Wing, 2023. "Effects of social distancing policy on labor market outcomes," Contemporary Economic Policy, Western Economic Association International, vol. 41(1), pages 166-193, January.
    24. Scott R. Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis, 2023. "Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments," Review of Finance, European Finance Association, vol. 27(6), pages 2271-2304.
    25. Löschel, Andreas & Sturm, Bodo & Vogt, Carsten, 2013. "The demand for climate protection—Empirical evidence from Germany," Economics Letters, Elsevier, vol. 118(3), pages 415-418.
    26. Feld, Lars P. & Truger, Achim & Wieland, Volker, 2020. "Die gesamtwirtschaftliche Lage angesichts der Corona-Pandemie," Special Reports / Sondergutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, number 215776.
    27. Roth, Alvin E., 1986. "Laboratory Experimentation in Economics," Economics and Philosophy, Cambridge University Press, vol. 2(2), pages 245-273, October.
    28. Solomon, Barry D. & Johnson, Nicholas H., 2009. "Valuing climate protection through willingness to pay for biomass ethanol," Ecological Economics, Elsevier, vol. 68(7), pages 2137-2144, May.
    29. Alberini, Anna & Bigano, Andrea & Ščasný, Milan & Zvěřinová, Iva, 2018. "Preferences for Energy Efficiency vs. Renewables: What Is the Willingness to Pay to Reduce CO2 Emissions?," Ecological Economics, Elsevier, vol. 144(C), pages 171-185.
    Full references (including those not matched with items on IDEAS)

    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Economics of Welfare > Health Economics > Economics of Pandemics > Specific pandemics > Covid-19 > Environment

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bernard, René & Tzamourani, Panagiota & Weber, Michael, 2022. "Climate change and individual behavior," Discussion Papers 01/2022, Deutsche Bundesbank.
    2. Paul Lehmann & Silke Beck & Mariana Madruga de Brito & Erik Gawel & Matthias Groß & Annegret Haase & Robert Lepenies & Danny Otto & Johannes Schiller & Sebastian Strunz & Daniela Thrän, 2021. "Environmental Sustainability Post-COVID-19: Scrutinizing Popular Hypotheses from a Social Science Perspective," Sustainability, MDPI, vol. 13(16), pages 1-21, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alberini, Anna & Bigano, Andrea & Ščasný, Milan & Zvěřinová, Iva, 2018. "Preferences for Energy Efficiency vs. Renewables: What Is the Willingness to Pay to Reduce CO2 Emissions?," Ecological Economics, Elsevier, vol. 144(C), pages 171-185.
    2. Johannes Diederich & Timo Goeschl, 2014. "Willingness to Pay for Voluntary Climate Action and Its Determinants: Field-Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(3), pages 405-429, March.
    3. Shewmake, Sharon & Okrent, Abigail & Thabrew, Lanka & Vandenbergh, Michael, 2015. "Predicting consumer demand responses to carbon labels," Ecological Economics, Elsevier, vol. 119(C), pages 168-180.
    4. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    5. Alberini, Anna & Ščasný, Milan & Bigano, Andrea, 2018. "Policy- v. individual heterogeneity in the benefits of climate change mitigation: Evidence from a stated-preference survey," Energy Policy, Elsevier, vol. 121(C), pages 565-575.
    6. Amoah, Anthony & Ferrini, Silvia & Schaafsma, Marije, 2019. "Electricity outages in Ghana: Are contingent valuation estimates valid?," Energy Policy, Elsevier, vol. 135(C).
    7. Jens Abildtrup & Jette Bredahl Jacobsen & Suzanne Elizabeth Vedel & Udo Mantau & Robert Mavsar & Davide Pettenella & Irina Prokofieva & Florian Schubert & Anne Stenger & Elsa Varela & Enrico Vidale & , 2023. "Preferences for climate change policies: the role of co-benefits," Post-Print hal-04132398, HAL.
    8. Diederich, Johannes & Goeschl, Timo, 2011. "Willingness to Pay for Individual Greenhouse Gas Emissions Reductions: Evidence from a Large Field Experiment," Working Papers 0517, University of Heidelberg, Department of Economics.
    9. Alberini, Anna & Bigano, Andrea & Ščasný, Milan & Zvěřinová, Iva, 2016. "Preferences for Energy Efficiency vs. Renewables: How Much Does a Ton of CO2 Emissions Cost?," MITP: Mitigation, Innovation and Transformation Pathways 249352, Fondazione Eni Enrico Mattei (FEEM).
    10. Daan Hulshof & Machiel Mulder, 2020. "Willingness to Pay for $$\hbox {CO}_2$$CO2 Emission Reductions in Passenger Car Transport," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(4), pages 899-929, April.
    11. Lea Skræp Svenningsen, 2017. "Distributive outcomes matter: Measuring social preferences for climate policy," IFRO Working Paper 2017/11, University of Copenhagen, Department of Food and Resource Economics.
    12. Diederich, Johannes & Goeschl, Timo, 2017. "To mitigate or not to mitigate: The price elasticity of pro-environmental behavior," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 209-222.
    13. Kubota, So & Onishi, Koichiro & Toyama, Yuta, 2021. "Consumption responses to COVID-19 payments: Evidence from a natural experiment and bank account data," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1-17.
    14. Lea S. Svenningsen, 2019. "Social preferences for distributive outcomes of climate policy," Climatic Change, Springer, vol. 157(2), pages 319-336, November.
    15. Tal Gross & Timothy J. Layton & Daniel Prinz, 2022. "The Liquidity Sensitivity of Healthcare Consumption: Evidence from Social Security Payments," American Economic Review: Insights, American Economic Association, vol. 4(2), pages 175-190, June.
    16. Anna Sokolova, 2023. "Marginal Propensity to Consume and Unemployment: a Meta-analysis," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 813-846, December.
    17. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-2553, October.
    18. Bisin, Alberto & Moro, Andrea, 2022. "Spatial‐SIR with network structure and behavior: Lockdown rules and the Lucas critique," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 370-388.
    19. Ulrich Schmidt & Stefan Traub, 2009. "An Experimental Investigation of the Disparity Between WTA and WTP for Lotteries," Theory and Decision, Springer, vol. 66(3), pages 229-262, March.
    20. Oben K Bayrak & Bengt Kriström, 2016. "Is there a valuation gap? The case of interval valuations," Economics Bulletin, AccessEcon, vol. 36(1), pages 218-236.

    More about this item

    Keywords

    COVID-19; Environmental policy; Income shock; Welfare analysis; Willingness topay;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cawmdp:117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/camuede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.