Working Paper: NBER ID: w13678
Authors: Matthew Kotchen; Michael Moore
Abstract: This paper investigates how concern for the environment translates into predictable patterns of consumer behavior. Two types of behavior are considered. First, individuals who care about environmental quality may voluntarily restrain their consumption of goods and services that generate a negative externality. Second, individuals may choose to pay a price premium for goods and services that are more environmentally benign. A theoretical model identifies a symmetry between such voluntary restraint and a voluntary price premium that mirrors the symmetry between environmental policies based on either quantities (quotas) or prices (taxes). We test predictions of the model in an empirical study of household electricity consumption with introduction of a price-premium, green-electricity program. We find evidence of voluntary restraint and its relation to a voluntary price premium. The empirical results are consistent with the theoretical model of voluntary conservation.
Keywords: voluntary conservation; green electricity; consumer behavior; environmental economics
JEL Codes: H23; Q3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conservationist households (D10) | conventional electricity consumption (L94) |
| non-conservationists participating in green electricity program (Q48) | conventional electricity consumption (L94) |
| conservationists participating in green electricity program (Q48) | conventional electricity consumption (L94) |
| participation in green electricity program (Q48) | voluntary restraint (L42) |
| conservationists and non-conservationists (Q20) | consumption of green electricity (Q48) |