Is the income elasticity of the willingness to pay for pollution control constant?

This paper explores both theoretically and empirically whether or not the willingness to pay (WTP) for pollution control varies with income. Our model indicates that the income elasticity of the marginal WTP for pollution reduction is only constant under very restrictive conditions, which are not necessary for an environmental Kuznets curve relationship between pollution and income. Our empirical analysis tests the null hypothesis that the elasticity of the WTP for pollution control with respect to income is constant, employing a multi-country contingent valuation study of eutrophication reduction in the Baltic Sea. Our findings reject this hypothesis, and estimate an income elasticity of the WTP for eutrophication control of 0.1 - 0.2 for low-income respondents and 0.6 - 0.7 for high-income respondents. Thus, our empirical results suggest that the elasticity is not constant and always less than one.