Do Increases in Income Affect Averting Behavior? A Study of Nicaragua's Social Protection Network Program.
Koethe, Benjamin Christian
- In developing countries, overall environmental quality is often low. Without strict environmental standards and enforcement, it is often up to the individual to protect himself from environmental degradation. Per capita income is also low in developing countries, and individuals must prioritize their expenditures. We may expect that, as people get richer, their averting behavior, actions taken to ... read moremitigate environmental harm, will increase, but given limited income, this may not be the case. In this paper, I study the changes in averting behaviors, such as water treatment and cooking fuel choice, when a household's income increases. Using data from the pilot phase of Nicaragua's Social Protection Network conditional cash transfer program that was designed as a randomized controlled experiment, I use a difference-in-difference model to study the effects of the cash transfers. I find that, while there is no effect with cooking fuel choice, there is a significant, positive program treatment effect for drinking water treatment. The water treatment effect is similar in magnitude to the program treatment effects for food expenditure, health, and education variables. The results indicate the poor in developing countries are concerned about environmental protection and its implications, but that greater emphasis is put on lower cost areas in which there are more immediate health implications.read less