Heterogeneous Complementarity Preferences and the Value of Nature — R&R at The Economic Journal

(with M. A. Drupp, J. N. Meya and B. Bos)

Abstract:
We study how preference heterogeneity regarding the limited substitutability of environmental public goods and private consumption affects the economic value of nature. We show theoretically that mean marginal willingness to pay (WTP) for nature depends on the entire distribution of complementarity preferences and increases with preference heterogeneity. We provide a summary statistic for the contribution of preference heterogeneity to mean marginal WTP and characterize preferences that a representative agent must hold to replicate the aggregate value of nature under heterogeneity. To empirically investigate preference heterogeneity, we conduct an experiment that directly elicits individual complementarity preferences using incentivized and hypothetical trade-offs between market goods and tree planting with its associated environmental-quality benefits. In a general population sample, we find that most individuals exhibit a considerable degree of complementarity, alongside substantial variation and a heavy right tail of extreme complementarity preferences. We conclude by illustrating that accounting for this heterogeneity, including for the shape of the preference distribution beyond its variance, can considerably increase the economic value of nature.

Public Preferences for Index Aggregation Imply Lower Ocean Sustainability   — R&R at PNAS

(with B. Bos and M. A. Drupp)

Abstract:
Sustainability indices are essential to track development progress and guide policy. They often aggregate diverse dimensions into a composite index, requiring value-based choices about the importance of each dimension (weighting) and the extent to which weaknesses in some area can be offset by strengths in others (substitutability). Such choices strongly shape indices but lack empirical support. We introduce a preference-elicitation experiment to align aggregation choices with stakeholder views and apply it to the Ocean Health Index (OHI). Respondents from twelve coastal countries predominantly view OHI goals as complementary, challenging current assumptions of perfect substitutability. Incorporating these public preferences yields substantially lower OHI scores, suggesting that ocean sustainability may be overstated and that policy should focus more on improving the weakest-performing dimensions.