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

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  • Andreas Loschel
  • Michael Price
  • Laura Razzolini
  • Madeline Werthschulte

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 the 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 benefits 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

  • Andreas Loschel & Michael Price & Laura Razzolini & Madeline Werthschulte, 2020. "Negative income shocks and the support of environmental policies - Insights from the COVID-19 pandemic," Framed Field Experiments 00710, The Field Experiments Website.
    • Handle: RePEc:feb:framed:00710
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    More about this item

    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

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