Is Environmental Consciousness Associated with Organic Consumption? - A Revealed Preference Approach

Abstract

Organic consumption is a way to promote sustainable agriculture while using fewer single-use products also reduces the burden of trash in the environment. Previous studies found that consumers’ pro-environmental behaviors are significantly positively correlated with organic consumption. However, the results are based on surveys expressed on the Likert scale and rely on participants’ imperfect retrospective memory of past organic purchases. In this study, we investigate the environmental motivation that leads consumers to purchase organic products using actual consumption data. In general, consumers buy organic products to avoid pesticides and chemicals for health reasons and/or to support more environmentally-friendly agriculture. The level of disposable product consumption is assumed to represent one’s environmental concern. Due to the presence of reverse causality of organic consumption and disposable product consumption, we employ a control function method to eliminate the endogeneity issue. Our result shows a significantly negative causal effect of disposable product consumption on organic consumption, indicating that organic consumption arises from care for the environment. It is found that a 10% increase in disposable product expenditure share causes an 8-percentage point decrease in the proportion spent on organic consumption.

Keywords: Organic, Environmental Concern

JEL Classification: D