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Envirodevonomics: A Research Agenda for a Young Field

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Listed:
  • Michael Greenstone
  • B. Kelsey Jack
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."

Suggested Citation

  • Michael Greenstone & B. Kelsey Jack, 2013. "Envirodevonomics: A Research Agenda for a Young Field," NBER Working Papers 19426, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19426
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    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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