New Ecological Paradigm meets behavioral economics: On the relationship between environmental values and economic preferences

Abstract

This paper empirically examines whether environmental values are correlated with economic preferences from behavioral economics and considers possible consequences when independence is assumed. The data for this analysis stem from a large-scale computer-based survey among more than 3700 German citizens. Our indicators for environmental values are based on the New Ecological Paradigm (NEP), which is a standard instrument in social and behavioral sciences and increasingly common in economic studies. The econometric analysis with Generalized Poisson regression models reveals strong correlations between two NEP scales and several economic preferences, which are based on established experimental measures. While our variables for altruism (measured in an incentivized dictator game) and positive reciprocity are significantly positively correlated, the indicators for trust and (less robust) negative reciprocity are significantly negatively correlated with the NEP scales, respectively. Only the variables for risk and time preferences (also measured in an incentivized experiment) are not robustly significantly correlated with the NEP scales. These estimation results recommend the additional inclusion of economic preferences in econometric analyses that use a NEP scale as explanatory factor of main interest for environmentally relevant behavior. Based on two empirical examples on stated and revealed environmental donations, it is shown that not considering social preferences, i.e. altruism, trust, and positive and negative reciprocity can lead to strong distortions due to omitted variable biases. The biased estimation of the effect of a NEP scale in this case is additionally illustrated in systematic Monte Carlo experiments with data generation processes from the empirical example with realized environmental donation activities.