Social Capital and the Willingness to Pay for Environmental Goods in African Countries

Abstract

There are several studies investigating the willingness to pay (wtp) for environmental goods. Most of these studies highlight the fact that the relationship between the WTP for environmental good and the GDP per capita is an inverted U shaped one. In other words, the low income countries, specifically Africa countries exhibit a low or weak WTP. However, these studies have neglected the influence of social capital. In fact social capital can positively affect the WTP through two main channels, namely information effect and peer effect. Thus, even in low income countries, the WTP for environmental goods can be very high. Thus, the contribution of this paper is twofold. First, using five waves of the World Value Survey (1981-2007) and mobilizing ordered Logit specifications, we explore the effects of social capital on the WTP for environmental preservation in thirteen African countries. Second, unlike most studies in the social capital literature, we deal with the plausible endogeneity of social capital using instrumental variable approach. Then after factoring in the endogeneity of social capital, results suggest that social capital positively and significantly affects the WTP for environment preservation in African countries. This suggests that government should promote civil associations enable to convey reliable and useful information about environment issues and stimulate peer effects among their members.