Averting expenditure and the cost of pollution

Abstract

The paper considers the relationship between the willingness to pay for environmental quality and averting expenditures--that is, the costs of measures undertaken in efforts to counteract the consequences of pollution. The models used assume perfect mobility among locations with different levels of environmental quality. The major results are: (1) Averting expenditures are not in general a good measure of willingness to pay; (2) averting expenditures are not always even a lower bound on willingness to pay; (3) even when averting expenditures are a lower bound, the difference between the level of such expenditures and willingness to pay cannot be attributed to the unavertible "aesthetic" consequences of pollution.