PublicationWorking paper

Social Preferences and Environmental Externalities

Abstract

Standard economic theory assumes that consumers ignore the externalities they create, such as emissions from burning fossil fuels and generating waste. In an incentivized study (N = 3, 718), we find that most people forgo substantial gains to avoid imposing negative externalities on others. Using administrative data on household waste, we show a clear link between such prosociality and waste behavior: prosociality predicts lower residual waste generation and higher waste sorting. Prosociality also predicts survey-reported pro-environmental behaviors such as lowering indoor temperature, limiting air travel, and consuming eco-friendly products. These findings highlight the importance of considering social preferences in environmental policy.

Campos-Mercade, P., Ek, C., Söderberg, M., & Schneider, F. H. (2025). Social preferences and environmental externalities (Working Papers No. 2025:6). Department of Economics, School of Economics and Management, Lund University.

Details

Author: Campos-Mercade, P., Ek, C., Söderberg, M., & Schneider, F. H.
Publication year: 2025
Published in: Working paper series: Department of Economics, School of Economics and Management, Lund University.

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Professor
Magnus Söderberg
magnus.soderberg@ratio.se

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