Inflation and WTP for Sustainable Products

We examine how inflationary pressure shapes consumers’ willingness to pay (WTP) a premium for sustainable products, and whether this relationship operates through consumers’ valuation of sustainability in retail environments. Using five repeated cross-sectional, nationally representative online surveys from Portugal collected December 2021–June 2024 (N = 5,013), we model WTP premiums (0–100%) for sustainably produced goods across product categories. We combine macroeconomic indicators (year-on-year CPI inflation and the 1-year Euribor rate) with a high-inflation indicator (months in which CPI inflation exceeds 3%) and a post-2021 period dummy capturing broader structural shifts. Because WTP is bounded, we estimate fractional-response models and report average marginal effects, with demographic controls and wave/region fixed effects. Aggregated across categories, high inflation reduces WTP by 4.82 percentage points (95% CI: −6.82, −2.82), while the post-2021 period is associated with higher WTP (+7.97 pp; 95% CI: 5.47, 10.22). Category patterns indicate larger inflation sensitivity for daily necessities (food: −6.04 pp; personal hygiene: −6.72 pp) than for durable purchases (automobiles: −3.90 pp). Inflation depresses WTP across the age distribution, with larger point estimates among younger consumers (about −6.5 pp at age 20 vs. −3.5 pp at age 60), though the age–inflation interaction is not statistically significant; parenthood effects are similarly small. Mediation tests indicate that inflation also reduces the valuation of sustainable stores (−0.466 units), which in turn is positively associated with WTP (+2.53 pp per unit). Including the mediator attenuates the direct inflation effect (from −2.89 to −1.79 pp), with a significant indirect effect of −1.10 pp, supporting partial mediation. Overall, inflation constrains sustainable consumption via reduced purchasing power and weakened sustainability salience in retail contexts, highlighting the importance of credible, low-friction sustainability signaling and pricing strategies during high-inflation episodes.