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Estimating the non-pecuniary benefit of engaging in pro-environmental behaviors: Incorporating both heterogeneous preferences and income endogeneity.

Cristian Ortiz,Mauricio Sarrias

Published 2022 in Journal of Environmental Management

ABSTRACT

This article estimates the individuals' non-pecuniary benefit of engaging in pro- environmental behaviors (PEB) using a large sample from Ecuador. As a novelty, we estimate a model that allows incorporating both unobserved heterogeneity in preferences and controlling for the potential endogeneity of income through instrumental variables. Although both problems have been addressed separately in the literature, we show that considering both sources of bias allows finding more accurate and credible monetary values. Our results show that subjective monetary evaluations regarding PEBs are generally overestimated (the income coefficient is underestimated), but not including unobserved heterogeneity hides important patterns for an important group of the sample with completely different preferences.

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