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Envirodevonomics: A Research Agenda for a Young Field

53 Pages Posted: 10 Sep 2013  

Michael Greenstone

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

B. Kelsey Jack

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: September 3, 2013

Abstract

Environmental quality in many developing countries is poor and generates substantial health and productivity costs. However, existing measures of willingness to pay for environmental quality improvements indicate low valuations by affected households. This paper argues that this seeming paradox is the central puzzle at the intersection of environmental and development economics: Given poor environmental quality and high health burdens in developing countries, why is WTP so low? We develop a conceptual framework for understanding this puzzle and propose four potential explanations: (1) due to low income levels, individuals value increases in income more than marginal improvements in environmental quality, (2) the marginal costs of environmental quality improvements are high, (3) political economy factors undermine efficient policy-making, and (4) market failures such as weak property rights and missing capital markets drive a wedge between true and revealed willingness to pay for environmental quality. We review the available literature on each explanation and discuss how the framework also applies to climate change, which is perhaps the most important issue at the intersection of environment and development economics. The paper concludes with a list of promising and unanswered research questions for the emerging sub-field of “envirodevonomics.”

Keywords: economic development, environment, externalities, market failures, climate change

JEL Classification: D04, D61, I15, O12, O13, Q56

Suggested Citation

Greenstone, Michael and Jack, B. Kelsey, Envirodevonomics: A Research Agenda for a Young Field (September 3, 2013). MIT Department of Economics Working Paper No. 13-19. Available at SSRN: https://ssrn.com/abstract=2322948 or http://dx.doi.org/10.2139/ssrn.2322948

Michael Greenstone (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

B. Kelsey Jack

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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