What is environmental income?

Abstract

A growing number of studies have revealed the dependency, particularly of poor people, on income from wild and uncultivated resources. Inclusion and analysis of environmental income are important in diagnosing the extent of poverty, for understanding its causes, and in identifying policies for its alleviation. The concept of environmental income is, however, poorly developed. Different studies use different measures, while underlying assumptions are often neglected or only partly revealed. In this paper, we analyze the concept of environmental income with respect to its sources, appropriate income measures, and ways of separating environmental income from non-environmental income. We argue that natural rent realized, through consumption or alienation, within the first link of a market chain provides a precise and logically consistent measure of environmental income under conditions of perfect competition. Because of frequent imperfections in rural markets, however, and because estimation of rent may be infeasible, a value added measure may sometimes have to be substituted. Regardless of which of the two concepts is chosen, explicit specification would represent a significant improvement in much of the current literature.