Non-market Goods Research Articles

Valuing diversification benefits through intercropping in Mediterranean agroecosystems: A choice experiment approach

The agricultural sector faces a series of environmental challenges such as water and soil pollution, erosion or biodiversity loss, especially in monoculture systems. Alternatively, crop diversification is seen as an option to reduce negative impacts and to enhance agricultural Ecosystem Services (ES). Most of these ES, such as improving resilience, despite the benefits and the high social value, do not take part in the market. In this context, the present paper presents an analysis of social preferences regarding crop diversification practices in Mediterranean agroecosystems. To do so, a choice experiment has been developed to assess social demand for more welfare-improving agricultural cropping systems. Benefits were obtained from improving environmental and cultural ES provision due to intercropping, as crop diversification practices. The results show a strong social preference for crop diversification with regard to all the benefits considered in the experiment. In fact, the total economic value for non-market goods and services provided by intercropping, which ranges from 900 to 1400 €/ha/year, for some crops might be potentially higher than cropland financial benefits. These results highlight the social support for a change in agricultural model to reach sustainable agroecosystems, which is essential to ensure the success of agrarian and rural development policies.

Does financial literacy affect the value of financial advice? A contingent valuation approach

The paper examines the determinants of investors’ willingness to pay (WTP) for suitable advice. We use contingent valuation, a method frequently used to estimate the value of non-market goods and services, with a unique survey data to estimate WTP for suitable advice. We find that investors with a high level of financial literacy recognize the value of financial advice; therefore, they have a higher WTP. These investors are also less likely to consult with a financial adviser if the advisory fee exceeds investors’ maximum WTP. We also suggest the policy implications of our empirical results.

The value of free time - the result of surveys

Abstract Free time has its value for every person, and according to the concept of work-life integration it also has socio-economic significance. Free time is the example of a good, whose value can be determined by various methods of estimating the value of non-market goods. One way to conduct this type of analysis is through surveys that allow you to collect declarations of individuals about the perceived value of a good. The subject of the study is an attempt to estimate free time based on individual assessments received as the part of the students’ survey. The survey used two research questions to determine the willingness to pay (WTP), which illustrates how much the respondent is willing to pay for a given condition or good, and the willingness to accept (WTA), illustrating the amount a person is willing to accept in exchange for the loss of a given condition or good. The obtained results of the valuation of free time were associated with gender and professional status of the respondents.

Relative Prices and Climate Policy: How the Scarcity of Non-Market Goods Drives Policy Evaluation

Climate change not only impacts production and market consumption, but also the relative scarcity of non-market goods, such as environmental amenities. We study fundamental drivers of the resulting relative price changes, their potential magnitude, and their implications for climate policy in Nordhaus' prominent DICE model, thereby addressing one of its key criticisms. We propose plausible ranges for these relative prices changes based on best available evidence. Our central calibration reveals that accounting for relative prices is equivalent to decreasing pure time preference by 0.6 percentage points and leads to a more than 50 percent higher social cost of carbon.

On Nonlinear Pricing

Nonlinear prices are commonly observed in market economies. This paper investigates nonlinear pricing under general conditions. It explores how nonlinear pricing can arise under nonconvexity. The arguments are presented in the context of an optimization problem, where a separating hypersurface provides information on pricing under general nonconvexity. The analysis applies to efficiency assessments, noting that Pareto efficiency can be expressed as the maximization of aggregate benefit. When nonconvexity requires a nonlinear separating hypersurface, this implies that nonlinear pricing becomes an integral part of efficiency analysis. This evaluation applies to nonmarket goods (e.g., the pricing of carbon emission) as well as market goods. We show how nonlinear pricing depends on the nature of nonconvexity. We discuss how associated price discrimination schemes can be implemented to support efficient allocations.

Preferences of the Poor Farming Household for Credit-Based Payment for Environmental Services: Attributes for Environmental Resource Conservation in the Oyo State Farm Settlements

Previous studies affirmed that both poverty and environmental resources degradation need to be tackled concomitantly. The reason is that poverty and environmental resources (agricultural land) are intertwining as a nexus; hence a one traffic-proffered solution is not sufficient enough to reduce the afterward menace poverty and environmental resource caused. An incentive that serves as an ‘adjudicator’, a credit-based payment for an environmental service is recognized for this task. Though this is a hypothetical case of Payment for Environmental Services (PES) that understudied the would-be response of the poor farming household through their preferences of PES attributes of environmental resource conservation and poverty reduction. This was designed with the use of choice experiment method, which is a multi-attribute approach of valuing non-market goods (agricultural land). Evidently, this study has convincingly proved that the poor farmers are willing to conserve their agricultural land, if the provision of necessary incentive is presented to them. The examined three farm settlements in Oyo state are: Afijio, Ijaye and Ido farm settlements. Educationally poor farming household shows that, 93(65.49%) preferred both options, whereas consumption poor farming house have 162(68.5%) respondents that sought for both option 1and 2.Housing/standard of living farming household recorded 98(34.63 %) for option 1 PES attributes and 95(33.57%)responded were for option 2 of PES attributes. The T-t test revealed that four of the paired poverty categories with respect to their preferences for the PES attributes options were significant. This study therefore suggests that poor farming household, whose farming is their livelihood should be sensitized to the provision of a deliberately designed poverty-environmental resource conservation credit-based PES, with a more flexible conditions. This will enable the poor farmers to be encouraged to participate in conservation of natural resource and by extension reducing poverty.

A life satisfaction approach to valuing the impact of health behaviours on subjective well-being

BackgroundIncreasingly, decision-makers are interested in understanding the returns on investments in programs and policies that promote health and prevent chronic diseases. While the costs of these programs are more easily quantified, many of the outcomes they aspire to achieve are intangible and lack obvious market values. The subjective well-being (SWB) method was developed to value a wide range of non-market goods, including health outcomes directly in monetary terms. This paper presents an application of the SWB approach to estimate the monetary value of health-promoting behaviours as the intermediate outcomes of health promotion and chronic disease prevention programs and policies.MethodsLife satisfaction (LS) was used as a proxy of individuals’ SWB. Based on the combined Canadian Community Health Survey 2009–10 data, we modeled LS as a function of income and healthy behaviours, controlling for the socio-demographic factors associated with LS at the individual level using ordinary least squares regression. Equivalent effects of income and healthy behaviours on LS derived from the models allowed us to estimate the trade-off between income and healthy behaviours.ResultsWe found that income and healthy behaviours were positively associated with LS. The values of increased physical activity, an additional daily serving of fruits/vegetables, and not smoking are respectively $631, $115 and $563 per week. These represent the amounts of additional weekly income required to maintain an individual at their level of LS in the absence of each of these behaviours.ConclusionsThe SWB method holds promise as a method to monetize the value of a range of non-market goods, including healthy behaviours for which market values do not exist. The SWB method can be applied efficiently and cost-effectively using readily available survey data.

Comparing the effect of oath commitments and cheap talk entreaties in contingent valuation surveys: a randomised field experiment

ABSTRACT Contingent valuation is a common methodology for eliciting preferences for non-market goods under hypothetical scenarios. Bias reduction strategies have been developed when evaluating low-cost realistic policy changes, including cheap-talk scripts, that alert respondents to tendencies to overstate values, and oath scripts, whereby respondents promise to answer valuation questions truthfully. This paper is the first large-scale experimental comparison of cheap-talk and oath commitments, amongst randomly-assigned respondents, in a field-setting using hypothetical voluntary donations. The data come from three general population surveys eliciting willingness to pay (WTP) for cultural institutions in England. We find limited and case-specific evidence regarding the effectiveness of cheap-talk and oath scripts in affecting stated values, which we attribute to realism and low cost of the proposals, which arguably diminishes hypothetical bias and produces realistic WTP values. We find evidence of the depressing effect of entreaty script on WTP or probability of paying in principle in only one of three case studies. Future research should replicate this experimental design with larger sample sizes and on non-voluntary payment mechanisms. Given the inconsistent findings across three large-scale experimental field studies, our recommendation is to include both cheap-talk and oath scripts where possible, and only cheap-talk where survey length is constrained.

Embedding Preference Uncertainty for Environmental Amenities in Climate Change Economic Assessments: A “Random” Step Forward

While there is a considerable debate regarding the choice of proper discount rates for assessing climate change projects and policies, only a tiny body of literature emphasizes “what to discount”. Usually, climate change economic assessments rely on tools and methods that employ strong simplifications, assuming, among others, given and fixed preferences about the values of man-made and environmental goods. Aiming to fill a gap in the literature, this paper leaves aside the issue of discounting and focuses on the nature and impact of preference uncertainty on the economic estimates of future climate change damages on ecosystem non-market goods and services. To this end, a general random walk-based stochastic model is proposed, combining a number of parameters, e.g., the growth of income, depletion of environmental assets, the elasticity of income and demand, and the change in preferences towards the environment. The illustrative application of the model shows that the value of environmental losses is significantly affected by the change in preferences. By doing so, the model allows the analyst to visualize future paths of preference evolutions and to bring future values of damaged environmental assets realistically to the fore. If these elements are neglected when estimating climate change-related future damages to environmental goods and services, the results may be too narrow from a policy perspective.

Health-related quality of life and compensating income variation for 18 health conditions in Iceland

ABSTRACTUsing data from an Icelandic health and well-being survey, carried out in 2007, 2009, and 2012, we estimate the value of health-related suffering in two different ways. Our primary aim is to obtain the monetary compensation needed to maintain the same level of well-being with and without 18 health conditions using the compensating-income-variation approach. This method employs individual well-being measures with no hypothetical situations involved, thus offering a solution to biases of frequently used methods to value non-marketed goods. We also use zero-one normalization of regression coefficients to estimate health-related quality-of-life weights. Results from monetary valuations indicate that 1,685,594 USD are needed per year to compensate for the presence of melancholy, 206,273 USD for frequent headaches, 153,396 USD for severely low vision, and 80,824 USD for severe monthly menstrual cramps. This research adds to the literature by employing two rarely used methods to a range of health conditions. By valuing several different conditions with the same sample and methodology this research provides a ranking between the conditions, aiding policy makers in prioritizing scarce resources. We do however advise against using the normalization method for policy purposes at this point, due to the deviation of results from the general literature.

Farmers' Heterogeneous Willingness to Pay for Farmland Non-Market Goods and Services on the Basis of a Mixed Logit Model-A Case Study of Wuhan, China.

The exploration of different stakeholders’ heterogeneous willingness to pay for farmland ecological value is a fundamental part of understanding the total value of farmland protection and designing a scientific farmland protection policy. Unlike the homogenous assumption used in the previous studies, the mixed logit model of choice experiment method was applied to estimate respondents’ heterogeneous willingness to pay for farmland non-market value (represented by farmland area, farmland fertility, water quality, air quality, species richness, and recreational value) in this study. Data came from a sample of 289 farmers in Wuhan, China who were face-to-face interviewed. Results showed that: (1) Farmers were unsatisfied with the status quo of the present farmland ecological environment and were willing to pay to preserve all the attributes of farmland non-market value. (2) Farmers had a heterogeneous preference for the status quo and recreational value—the error variances of these two attributes were both significant at the 1% level, and their willingness to pay for the farmland non-market value in Wuhan was 1141.88 Yuan/hm2. (3) Farmers’ cognition degree of farmland importance and whether respondents bought medical insurance or not had significant impacts on their willingness to pay. The results can provide the basic foundation for accurate valuation of farmland non-market services, help farmland regulators make the right farmland conversion decisions, and improve the resource allocation efficiency of local financial expenditure during farmland protection in Wuhan.

Ease vs. noise: Long-run changes in the value of transport (dis)amenities

For a complete cost-benefit analysis of durable infrastructures, it is important to understand how the value of non-market goods such as transit time and environmental quality changes as incomes rise in the long-run. We use difference-in-differences and spatial differencing to estimate the land price capitalization effects of metro rail in Berlin, Germany today and a century ago. Over this period, the negative implicit hedonic price of rail noise tripled. Our results imply income elasticities of the value of noise reduction and transport access of 2.2 and 1.4, substantially exceeding cross-sectional contingent valuation estimates.

Is the literature on the WTP-WTA disparity biased?

Empirical studies demonstrate the difference between the willingness-to-pay for a good and the willingness-to-accept giving it away, known as the WTP-WTA disparity. Understanding this effect helps intangible goods to be properly valued or the plausibility of suggested explanations to be adequately judged. We verified the existence of a publication bias in the literature (are studies finding larger disparities more likely to be published?) using 102 studies published over the period 1980–2018. We analysed how the estimate of disparity is associated with the estimation uncertainty using rank correlation and linear/quantile/panel/meta regression; this multiplicity of approaches was used to check the robustness of the results against confounding, skewness, hierarchical data, and possible changes over time. With few exceptions, a bias-suggesting positive association is present (yet decreases over time). Our analysis suggests that the mean disparity estimates may be overestimated, by approximately 12% (3% in more recent studies). Disparity is greater for non-market goods (confirming previous findings) and when the same respondents valued both WTP and WTA. Authors and editors should not withhold publication simply because the results are not regarded as sufficiently controversial (and it seems this problem has been largely overcome). When performing meta-analysis, the latest studies should also be included.

The value of pastoralism in Kenya: Application of total economic value approach

The value of pastoralism practiced in Kenya is not well appreciated, even though it is said to be enormous. The available statistics tend to underestimate this value from the point of view of its contribution to the local and national economies, due to the inadequacy of data and application of inappropriate valuation methodologies. This study analysed the contribution of pastoralism to Kenya’s national economy, using the total economic value (TEV) approach and by considering the traditional and non-traditional pastoral values. Secondary data were collected on livestock population, herd composition and structure, honey, beeswax, firewood, fishing and tourism. The findings of this study show that Kenya’s pastoral sector has an economic worth of US$1.13 billion with the livestock sector and non-livestock sector accounting for 92% (US$1.04 billion) and 8% (US$0.0903 billion), respectively. The annual national pastoral livestock offtake was valued at US$0.189 billion, while annual meat offtake was estimated at 154,968 tonnes, valued at US$0.389 billion. The national annual meat consumption was estimated at 553,200 tonnes, of which pastoral meat contributed 154,968 tonnes or 28%. The TEV approach integrates the many aspects of economic value contributed by pastoral systems, including market and non-market goods and services that are usually not accounted for. An accurate estimate of the contribution of pastoral production can be instrumental in lobbying for enhanced investment in the pastoral areas to boost environmentally sound development.

Choice certainty and deliberative thinking in discrete choice experiments. A theoretical and empirical investigation

Resource allocation decisions require information about individuals' preferences for goods and services. Survey based stated preference methods, such as discrete choice experiments (DCEs), are used to elicit preferences for non-market goods. A critique of stated preference research is that respondents to hypothetical surveys may not provide careful and thoughtful responses that reveal rational preferences. Choice certainty has been used to measure survey respondents' task engagement. Researchers assume that respondents who are certain about their choices provide deliberative responses. In the case of DCE, we argue that the variability of choice certainty is also important. We present a novel framework to identify thoughtful / deliberative respondents. The framework combines respondents’ certainty with their variability in certainty across a set of choice tasks. We test our framework empirically using data from two case studies. We find respondents with higher mean certainty and variability (i) seldom use decision heuristics, (ii) are more likely to have monotonic preferences, (iii) have longer response times, (iv) make choices that have higher interval validity, and (v) have higher choice consistency. We discuss the relevance of alternative ex-post calibration strategies with a view to improve the precision and accuracy of DCE-based welfare estimates.

The importance of social learning for non-market valuation

Neoclassical valuation methods often measure the contribution that non-market goods make to utility as income compensations. This circumvents Arrow's impossibility (AI) –a theoretical proof establishing the impossibility of social preferences – but those methods cannot be used in all settings. We build on Arrow's original proof, showing that with two additional axioms that allow for social learning, a second round of preference elicitation with a social announcement after the first, generates logically consistent social preferences. In short: deliberation leads to convergence. A ‘web-game’ aligning with this is trialed to select real world projects, in a deliberative way, with the board of an Australian Aboriginal Corporation. Analysis of the data collected in the trial validates our theory; our test for convergence is statistically significant at the 1% level. Our results also suggest complex social goods are relatively undervalued without deliberation. Most non-market valuation methods could be easily adapted to facilitate social learning.

Preference uncertainty as an explanation of anomalies in contingent valuation: coastal management in the UK

Directly asking respondents in contingent valuation surveys their willingness to pay is one of the few quantitative methods available to assess full economic value (including both use and non-use values) of non-market environmental goods. It therefore remains vitally important to better understand the reasons for consistently observed violations of procedural invariance in such surveys. This paper describes an empirical experiment designed to examine whether uncertainty might provide an explanation for three commonly observed violations of procedural invariance in contingent valuation. In each case, we present a plausible explanation for each anomaly through decision heuristics brought about by respondents trying to answer the question truthfully when their underlying preferences are stable but uncertain. Using a novel semi-parametric estimator, we find little evidence to support the idea that anomalies can be resolved through an uncertainty explanation, but our experiment provides noteworthy insights into the ways uncertain preferences may be shaped by the nature of contingent valuation questions.

仮想的市場評価法を用いた鉄道駅改良による非市場財的便益の計測 : 駅・まち一体改善事業による整備駅を対象として

仮想的市場評価法を用いた鉄道駅改良による非市場財的便益の計測 : 駅・まち一体改善事業による整備駅を対象として

Estimation of Total Benefits of Battery-Swapping Electric Bus Systems using a Contingent Valuation Method

CO2 emissions from fossil fuel combustion and industrialization contribute nearly 78% to the total greenhouse gas emissions. To reduce CO2 emissions in the transportation sector, the South Korean government is attempting to introduce a battery-swapping electric bus system. Some government-level economic analysis studies have been conducted to analyze the cost/benefit of the introduction. This research, by contrast, estimates the estimation of the benefits of the new bus system using the contingent valuation method (CVM), which is widely used to estimate the value of non-market public goods. A survey was conducted in Seoul city, and a total of 972 complete CVM questionnaires were used for analysis. A valuation function was developed for the study, and the total willingness-to-pay (TWTP) for the new system was estimated. Total benefits of the new system were USD 36,537,470 and the B/C ratio was computed as 1.47, which is slightly higher than the results of the previous national level research. If the international market price of battery cells decreases, and battery cells become more efficient, the B/C ratio of introducing the new battery-swapping electric bus system will increase.

The derivation of discount rates with an augmented measure of income

Most developed economies invest in public goods such as national defense, education, infrastructure, and the environment. Discount rates used to evaluate such projects should reflect the rate of return on the current mix of investment opportunities. Rates derived from the productivity of private capital neglect returns beyond the market boundary. The present paper derives discount rates using an augmented measure of national income inclusive of non-market goods. In an empirical application focusing on air pollution and climate damages in the United States economy, the paper reports that the difference between augmented and market discount rates averages 0.3 percentage points from 1999 to 2014.