Willingness to pay for environmental protection and the importance of pollutant industries in the regional economy. Evidence from Italy

This work analyses whether the incidence and production of polluting industries influences the individual willingness to pay (WTP) for the environment. Cross-country studies on the determinants of environmental WTP do not capture the fact that individual perceptions of environmental protection may be due to specific regional conditions. Therefore, this paper adopts a conceptual framework where both pollution and environmental protection are costly, and individuals face a choice between pollution or environmental protection. It is argued that the individual perception of such costs depends on regional settings, making individuals that live in less polluted areas prefer environmental protection. This hypothesis is empirically tested by performing an empirical analysis on the individual WTP for environmental protection in the Italian regions (NUTS-2 level) from the European Values Study. The results show that increases of production in polluting industries exert an effect on WTP for environmental protection and that this effect is mediated by the regional incidence of polluting industries: in “healthy” regions, an increase of production in the polluting sector increases the environmental WTP, while it has an opposite effect in regions where the incidence of the polluting sector is already high.