Valuation 8: Benefit Transfer and MetaAnalysis

1
Valuation 8 Benefit Transfer and Meta-Analysis

• Why benefit transfer?
• Meta-analysis
• Two applications
• Income elasticities
• Application of benefit transfer

2
Last weeks we looked at

• Various methods to estimate the value of
  environmental goods and services not traded on
  markets
• Also, some empirical examples were shown
• It turned out that it is actually very hard to
  reliably estimate prices one needs many
  assumptions, good data, and smart statistics, and
  even then all sorts of things may go wrong

3
Why Benefit Transfer?

• Valuation is hard
• As a result, applied valuation studies are
  expensive
• A small hedonic pricing study, for instance,
  costs about a year of a PhD student that is,
  after the data have been collected and digitised
• Ditto for travel costs
• A contingent valuation study is more expensive

4
Why Benefit Transfer? -2

• Valuation is expensive
• Monetary values are also hard needed
• Wouldnt it be nice if we could take the
  estimated values of case 1 and apply them to case
  2?
• For that, we need the benefit transfer function
• Where to get that function?

5
Meta-Analysis

• Meta-analysis is a technique that originates in
  medical science
• One collects a number of quantitative studies,
  say on treatment X for disease Y
• One uses the results of these studies as
  observations in a regression, say the reduced
  mortality as the dependent variable and the dosis
  of the medicine, sex, progression of the disease
  and so on as explanatory variables

6
Meta-Analysis -2

• Meta-analysis is a formal literature review
• Advantages include a much larger sample of data,
  different analytical techniques, and different
  analysts
• The main disadvantage is that one typically only
  has access to published results, which are always
  incomplete
• Meta-analysis not only provides a rigorous
  synthesis of the literature, it also identifies
  outlier studies, knowledge gaps, and priors for
  further analysis

7
Wetlands/Brouwer

• 30 studies of the WTP per person for wetland
  preservation in North America and Europe
• 103 observations
• Wetlands were made comparable by looking at the
  their functions flood control, water supply,
  water purification, and nature/recreation
• Each observation was associated with one or more
  functions

8
Wetlands/Brouwer -2

• The study also served methodological purposes
• Additional explanatory variables included payment
  vehicle (tax or other) elicitation format
  (open-ended or other)
• Quality was measured by response rate, but as an
  explanatory variable
• All studies are CVM studies
• Wetland size and income were excluded

9
LnWTP R2 0.38
10
Wetlands/Brouwer -3

• On average, people are willing to pay
  93/person/year for wetland preservation
• Note that the median is only 51
• Taxes attract higher contributions
• Open ended questions lead to smaller answers
• North Americans are willing to pay more
• Higher response rates imply lower values
• Little differences between functionality of
  wetlands

11
Wetlands/Bishop

• 39 studies of the value per acre
• 65 observations, but not independent
• 11 functions were distinguished, and wetland size
  included
• Four methods Net factor income replacement
  cost valuation other
• Studies were classified as weak or strong, based
  on data quality, consistency, method, and
  uncertainty

12
Wetlands/Bishop -2

• Different methods lead to different results Note
  that this is measured in the mean (dummies), not
  slopes
• Different functions do not lead to different
  results, except for bird watching and hunting
• Larger wetlands are slightly less valuable, per
  acre, but there is a clear relationship between
  size and total value

13
Values and Income

• The environment is typically seen as a luxury
  good Richer people spend a higher proportion of
  their income on environmental protection
• At first sight, this is confirmed by the
  Environmental Kuznets Curve, but this may also
  have to do with technological progress
• Some environmental commodities are necessary
  goods, e.g., clean water

14
Values and Income

• But, surely, richer people care proportionally
  more about nature, climate and similar things?
• A literature survey shows that WTP, as a share of
  income, for water quality, wetlands, parks, old
  forests, new forests, heathlands, the
  environment, eco-agriculture falls with income,
  in Finland, France, the Netherlands, Norway,
  Spain and Sweden
• The income elasticity may be as low as 0.25

15
Validity of Benefit Transfer

• Six studies performed the following test
  Estimate the value of something at two sites, and
  predicted the value of the one site from the
  observations of the other
• Sport fishing 5-40 (distance, harvest, quality)
• Water quality 1-75 (costs, size, depth,
  accessibility, quality, use, income)
• Recreation 1-475 (costs, size, substitutes,
  population, age)
• Water quality 18-41 (bid, use, education, age,
  user)
• Fishing 1-34 (bid, period)
• Rafting 6-228 (flow, costs, intensity, reason
  for visit, home, income, sex, age, education)

16
Dutch Wetlands -2

• Two studies, both about agricultural measures to
  protect birds and flowers
• Study 1 1993 500 ha near Sneek monthly and
  annual WTP payment card open ended locals and
  further afield 30 response CVM
• Study 2 1994 15660 ha near Rotterdam annual
  WTP payment open ended locals and much
  further afield 30 response CVM

17
Dutch Wetlands -2

• Study 1 did not show distance decay study 2 did
  the following results are based on the locals
  only
• Study 1, all DGl 96.6 (8.9) per year
• Study 1 DGl 54.5. (11.3) per year
• Study 2 DGl 74.2 (5.8) per year
• Study 1 (all) is an outlier note the temporal
  embedding if asked per month, people are
  willing to pay more per year

18
Dutch Wetlands -4

• The results were regressed on sex, education,
  household composition (65), income, attitude,
  knowledge, and membership
• The estimated regressions have significantly
  different parameters, except perhaps for 1
  (annual) and 2
• What do the predictions look like compared to the
  observed values?

19
Dutch Wetlands -5