Heterogeneity in Environmental Demand

Posted: 11 Oct 2013

See all articles by Daniel J. Phaneuf

Daniel J. Phaneuf

North Carolina State University - Department of Agricultural & Resource Economics

Date Written: June 2013


Heterogeneity is a defining characteristic of environmental demand studies that use household-level data. People make different choices due to observed and unobserved differences in preferences and constraints, choice elements are quality-differentiated commodities that can be consumed in different ways, and observed characteristics of people are often import for policy. In this review I examine how environmental economists have responded to the challenges and opportunities this heterogeneity implies. I categorize the types of heterogeneity that can be present, provide examples of each, and propose criteria to use in deciding when explicit attention should be paid to the different types. I then show how a variety of economic and econometric models have been used to accommodate the various dimensions of observed and unobserved heterogeneity, and I discuss opportunities for further research on the topic.

Suggested Citation

Phaneuf, Daniel J., Heterogeneity in Environmental Demand (June 2013). Annual Review of Resource Economics, Vol. 5, Issue 1, pp. 227-244, 2013, Available at SSRN: https://ssrn.com/abstract=2339082 or http://dx.doi.org/10.1146/annurev-resource-091912-151841

Daniel J. Phaneuf (Contact Author)

North Carolina State University - Department of Agricultural & Resource Economics ( email )

Box 8109
3332 Nelson Hall
Raleigh, NC 27695-8109
United States

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