Revisiting money and labor for valuing environmental goods and services in countries

View/ Open
File version
Accepted Manuscript (AM)
Author(s)
Kassahun, Habtamu Tilahun
Jacobsen, Jette Bredahl
Nicholson, Charles F
Griffith University Author(s)
Year published
2020
Metadata
Show full item recordAbstract
Many Stated Preference studies conducted in developing countries provide estimates of a low willingness to pay (WTP) for a wide range of goods and services. However, recent studies in these countries indicate that this may partly be a result of the choice of payment vehicle, not the preference for the good. Thus, low WTP may not indicate a low welfare effect for public projects in developing countries. We argue that in a setting where 1) there is imperfect substitutability between money and other measures of wealth (e.g., labor), and 2) institutions are perceived to be corrupt, including payment vehicles that are currently ...
View more >Many Stated Preference studies conducted in developing countries provide estimates of a low willingness to pay (WTP) for a wide range of goods and services. However, recent studies in these countries indicate that this may partly be a result of the choice of payment vehicle, not the preference for the good. Thus, low WTP may not indicate a low welfare effect for public projects in developing countries. We argue that in a setting where 1) there is imperfect substitutability between money and other measures of wealth (e.g., labor), and 2) institutions are perceived to be corrupt, including payment vehicles that are currently available to the individuals and less prone to corruption may be needed to obtain valid welfare estimates. Otherwise, we risk underestimating the welfare benefit of projects. We demonstrate this through a rural household contingent valuation (CV) survey designed to elicit the value of access to reliable irrigation water in Ethiopia. Of the total average annual WTP for access to reliable irrigation service, cash contribution comprises only 24.41%. The implication is that socially desirable projects might be rejected based on cost-benefit analysis as a result of welfare gain underestimation due to mismatch of payment vehicles choice in valuation studies.
View less >
View more >Many Stated Preference studies conducted in developing countries provide estimates of a low willingness to pay (WTP) for a wide range of goods and services. However, recent studies in these countries indicate that this may partly be a result of the choice of payment vehicle, not the preference for the good. Thus, low WTP may not indicate a low welfare effect for public projects in developing countries. We argue that in a setting where 1) there is imperfect substitutability between money and other measures of wealth (e.g., labor), and 2) institutions are perceived to be corrupt, including payment vehicles that are currently available to the individuals and less prone to corruption may be needed to obtain valid welfare estimates. Otherwise, we risk underestimating the welfare benefit of projects. We demonstrate this through a rural household contingent valuation (CV) survey designed to elicit the value of access to reliable irrigation water in Ethiopia. Of the total average annual WTP for access to reliable irrigation service, cash contribution comprises only 24.41%. The implication is that socially desirable projects might be rejected based on cost-benefit analysis as a result of welfare gain underestimation due to mismatch of payment vehicles choice in valuation studies.
View less >
Journal Title
Ecological Economics
Volume
177
Copyright Statement
© 2020 Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence (http://creativecommons.org/licenses/by-nc-nd/4.0/) which permits unrestricted, non-commercial use, distribution and reproduction in any medium, providing that the work is properly cited.
Subject
Development studies
Applied economics
Other economics
Science & Technology
Social Sciences
Life Sciences & Biomedicine
Ecology
Economics