ARE RURAL RESIDENTS WILLING TO PAY ENOUGH TO IMPROVE DRINKING WATER QUALITY?1

ABSTRACT: The concentrations of iron and sulfate in community water supplies are a concern for a number of areas in southwestern Minnesota. This study used the contingent valuation method to determine how much consumers would be willing to pay to improve their drinking water quality. On average, individuals were willing to pay US$5.25 per month (in 1995 U.S. dollars) to reduce the level of iron and US$4.33 per month to reduce the level of sulfate in their water to the USEPA's secondary standards for drinking water quality. Respondents with negative perceptions of their drinking water quality were willing to pay more to improve water quality. The aggregate annual willingness to pay (WTP) for all consumers in community water systems in southwestern Minnesota that were out of compliance with water quality standards were estimated to be US$2.4 million and US$2.0 million (in 1995 dollars) for reducing the levels of iron and sulfate, respectively. Yet the total WTP of consumers who use small community water systems may not be enough to pay the full cost of providing improved water in those systems. Economies of scale in water treatment and difficulties in financing improvements mean that technical innovation, government assistance, or institutional changes may be needed to improve water quality in these areas.     

Exploring Values,Context and Perceptions in Contingent Valuation Studies: The CV Market Stall Technique and Willingness to Pay for Wildlife Conservation

Public preferences for conservation and environmental management may be identified in willingness to pay (WTP) studies. Normally part of a contingent valuation exercise, WTP studies elicit monetary estimates of non-market economic goods. This paper describes a new approach to WTP, the CV Market Stall, a technique that adds a discursive, qualitative dimension to contingent valuation. It is suggested that the CV Market Stall technique is a good method for exploring attitudes and responses to environmental project proposals. The flexible format, with an emphasis upon information provision, discussion and learning would also allow contingent valuation to be extended to much more complex and uncertain environmental issues.     

Valuation of crop genetic resources in Kaski, Nepal: farmers' willingness to pay for rice landraces conservation

Crop genetic resources constitute an important aspect of biodiversity conservation, both because of their direct value to the farmers and due to their indirect global value. This study uses the contingent valuation method to document the economic value of crop genetic resources based on the farmers' willingness to pay for conservation. A total of 107 households in Kaski, Nepal were surveyed in November 2003. Their mean willingness to pay was USD 4.18 for in situ and USD 2.20 for ex situ conservation per annum. Landholding size, household size, education level, socio-economic status, sex of respondent, number of crop landraces grown, and knowledge on biodiversity influenced the willingness to pay for in situ conservation, whereas only landholding size and household size influenced the willingness to pay for ex situ conservation. The respondents were willing to contribute more for in situ than ex situ conservation because of the additional effect of direct use and direct involvement of the farmers in in situ conservation. This study supports the view that economic valuation of crop genetic resources can assist the policy makers in setting conservation priorities.     

Willingness to pay for waste management improvement in Dhaka city, Bangladesh

We employed the contingent valuation method to estimate the willingness to pay of the respondents to improve the waste collection system in Dhaka city, Bangladesh. Our objective was to estimate how WTP differs between respondents who received or did not receive door to door waste collection. The methodology consisted of asking people directly about their willingness to pay an additional waste collection service charge to cover the costs of a new waste management project. The mean value of WTP for areas that received waste collection service areas was higher than for residents of areas that did not but the difference was not statistically significant. The aggregate value of WTP of the respondents in Dhaka city was 7.6 million Taka (USD0.1 million).     

Lexicographic preference in biodiversity valuation: Tests of inconsistencies and willingness to pay

Previous contingent valuation (CV) studies on biodiversity have indicated that as much as one-quarter of the respondents show lexicographic preferences when facing biodiversity-money trade-offs. This behaviour is incompatible with welfare theory underlying CV, and thus questions the validity and reliability of the outcome of CV of changes in biodiversity. However, it is difficult from CV responses to distinguish between strict and modified lexicographic preferences, and those attaching a high value to biodiversity. This paper adds to the empirical evidence showing that what at first hand seems to represent strict lexicographic preferences is at most representing modified lexicographic preferences, and probably rather represent just high valuation of biodiversity. Data on both hypothetical and actual willingness to pay (WTP) from a CV study on biodiversity were used to perform tests of inconsistent attitudes to estimate the maximum share of non-compensatory preferences for biodiversity. The results show that there are very few respondents in the group that consistently state high preference for biodiversity preservation and show clear reluctance to trade-off biodiversity with other goods. However, this group also had higher WTP, both hypothetical and actual, than the reference group. This is consistent with exchange preferences and steep indifference curves. Thus, people with lexicographic preferences for biodiversity are probably less numerous than previously indicated.     

An assessment of household willingness to pay for curbside recycling: a comparison of payment card and referendum approaches

Curbside recycling is a tool that communities use to reduce the need for landfill space. This study provides contingent valuation estimates of household willingness to pay (WTP) to continue a curbside recycling program in the face of budget cuts. Comparisons of two forms of the contingent valuation method (CVM) are provided: a single bounded referendum and a payment card. Neither approach emerges as unambiguously superior. Response rates were virtually identical. Both approaches show that support for curbside recycling is highly sensitive to price. Regression results from the payment card provided a more thorough identification of socio-demographic variables associated with WTP than the referendum, but the explanatory power of the two regressions did not differ significantly. The referendum estimates of mean WTP exceed those from the payment card, although the disparities are less than those typically reported in the CVM literature. Local policy makers cited the CVM results as influencing their decisions regarding funding options for the future of the program, and seemed to appreciate the fact that the two approaches provided a fairly narrow range of estimates of WTP. In an era when more of the burden of financing of environmental programs is being shifted to the local level, use of CVM to estimate the WTP of consumers for highly disaggregated goods and services designed to achieve environmental improvement will likely become more relevant to local decision makers who are interested in understanding their constituents' views.     

Willingness to pay for safe drinking water: Evidence from Parral, Mexico

A referendum-format contingent valuation (CV) survey is used to elicit household willingness to pay responses for safe and reliable drinking water in Parral, Mexico. Households currently adopt a variety of averting and private investment choices (e.g., bottled water consumption, home-based water treatment, and installation of water storage facilities) to adapt to the existing water supply system. These revealed behaviors indicate the latent demand for safer and more reliable water services, which is corroborated by the CV survey evidence. Validity findings include significant scope sensitivity in WTP for water services. Further, results indicate that households are willing to pay from 1.8% to 7.55% of reported household income above their current water bill for safe and reliable drinking water services, depending upon the assumptions about response uncertainty.     

Economic valuation of urban forest benefits in Finland

Urban development projects may cause loss of amenity values of green areas, which should be taken into consideration in planning. Therefore, quantitative information on residents' valuation concerning urban forests is needed for assessing urban land use. The purpose of this investigation was to study the valuation of urban forests in two different urban environments Joensuu and Salo, Finland. The aims were to study the attitudes towards and benefits related to the use of urban forests and, in particular, to measure the valuations in monetary terms using contingent valuation, i.e. measure the residents' willingness-to-pay for larger wooded recreation areas and for small forested parks. Urban forests were seen in both towns as clearly producing positive benefits rather than causing negative effects. The negative features of forests were related to the management of the areas rather than their existence. The main values were related to nature and social functions of forests. In contrast, timber production achieved a distinctively low priority in both study towns. The results stress the importance of defining urban forest policies for municipalities in Finland. More than two-thirds of the respondents were willing to pay for the use of recreation areas. Good location and active management raised the average WTP. Moreover, approximately half of the respondents were willing to pay for preventing construction in urban forests. The results also show that the monetary value of amenity benefits in recreation areas is much higher than the present maintenance costs. The examples concerning the advantageousness of construction on green areas suggest that a limit could be found where the infill of housing areas is not worthwhile from the point of view of society, if the losses of green space benefits are taken into account.     

Information and Willingness to Pay in a Contingent Valuation Study: The Value of S. Erasmo in the Lagoon of Venice

This paper reports on a contingent valuation (CV) study eliciting willingness to pay (WTP) for a public program for the preservation of lagoon, beach and infrastructure in the island of S. Erasmo in the Lagoon of Venice, Italy. We use split samples to investigate the effect of providing a summary of reasons for voting in favor and against the program before the referendum valuation question. Reminding respondents of the reasons for voting for or against the program increases WTP among less highly educated respondents, and decreases WTP among more highly educated respondents.     

Household Willingness to Pay and Farmers' Willingness to Accept Compensation for Establishing a Recreational Woodland

The UK Forestry Commission's recently implemented Community Woodland scheme sets out to provide new recreational woodland facilities near to towns and cities where such resources are in short supply. This study examines household willingness to pay (WTP) for such a proposed woodland by means of the contingent valuation (CV) method. A stratified sample of 325 households in Wantage, Oxfordshire, was interviewed and asked to state both their annual and per-visit WTP. Analysis of a number of recognized potential biases suggested that the results obtained must be treated with caution although we argue that the CV provides a useful ballpark indication of preferences. A simultaneous CV survey of farmers' willingness to accept compensation for converting agricultural land into woodland proved to be far more robust, despite a small sample size. We conclude that farmers are more familiar with the concept of assessing potential compensation than are households with estimating hypothetical payments for increased provision of public goods.     

Policy And Practice Green Grass and Brown Roots: Understanding Environmental Problems in Deprived Neighbourhoods

Understanding neighbourhood conditions can play an important role in urban environmental management, especially when environmental services are lacking and new approachesare being debated. This paper describes and evaluates three research methods for assessing some of the environmentalproblems facing low income households and communities: (1) broad spectrum household surveys; (2) participatory rapid assessment; and (3) contingent valuation. As part of the study upon which this paper is based, the techniques were applied on a small scale in Jakarta. The paper finds that each technique can provide important and often complementaryinsights. The broad spectrum survey is particularly suitable to broad based planning, participatory appraisal to NGO initiatives and contingent valuation to utility pricing decisions.     

Aggregating the benefits of environmental improvements: distance-decay functions for use and non-use values

One of the main problems in using environmental cost-benefit analysis is deciding on the relevant population: whose benefits should we count? This is important since aggregate benefits depend on both per-person benefit and the number of beneficiaries. Yet this latter term is often hard to evaluate. Distance-decay functions are one way of addressing this problem. In this paper, we present estimates of distance-decay functions for a particular environmental improvement, namely a reduction in low flow problems on the River Mimram in Southern England. We do this both for users and non-users, in the context of a contingent valuation study of the benefits of improving low flow conditions. We test whether distance-decay effects for mean Willingness to Pay are stronger for a single environmental good (the River Mimram, in this case) than for a more inclusive set (here, all rivers in Thames region which suffer from low flow problems). Finally, we explore the impact on part-whole bias, in terms of the relationship between WTP for an individual site and WTP for a more inclusive group of sites, of allowing for distance-decay effects.     

Costs and benefits of urban erosion and sediment control: The North Carolina experience

The EPA’s new nonpoint source pollution control requirements will soon institutionalize urban erosion and sediment pollution control practices nationwide. The public and private sector costs and social benefits associated with North Carolina’s program (one of the strongest programs in the country in terms of implementation authority, staffing levels, and comprehensiveness of coverage) are examined to provide general policy guidance on questions relating to the likely burden the new best management practices will have on the development industry, the likely costs and benefits of such a program, and the feasibility of running a program on a cost recovery basis. We found that urban erosion and sediment control requirements were not particularly burdensome to the development industry (adding about 4% on average to development costs). Public-sector program costs ranged between $2.4 and $4.8 million in fiscal year 1989. Our contingent valuation survey suggests that urban households in North Carolina are willing to pay somewhere between $7.1 and $14.2 million a year to maintain current levels of sediment pollution control. Our benefit-cost analysis suggests that the overall ratio is likely to be positive, although a definitive figure is elusive. Lastly, we found that several North Carolina localities have cost recovery fee systems that are at least partially self-financing. This article is based on research by the authors for the North Carolina Department of Environment, Health and Natural Resources (DEHNR). The views are those of the research team and do not necessarily reflect the position of DEHNR.     

Air quality assessment by contingent valuation in Ji'nan, China

Along with urbanization and environmental deterioration within China, many residents' desire for improved air quality has increased. To address this topic, this study focuses on the relationship between poor air quality and residents' willingness to pay for improved air quality in the city of Ji'nan. As a means of quantifying an individual's willingness to pay (WTP) for improved air quality, a contingent valuation method (CVM) was employed. A sample of 1500 residents was chosen, based on the stratified sampling method. The respondents' WTP was then elicited through a series of face-to-face interviews, conducted using a range of hypothetical, open-ended scenario questions. The results showed that 59.7% of respondents were able to express a positive WTP, and that the average WTP was 100 Chinese Yuan (CNY) per person, per year. In order to establish the relationship between endogenous variables and WTP, both a Probit model on the probability of a positive WTP, and a stepwise regression model were constructed. Most parameters in the econometric analysis demonstrated the expected results. It was found that annual household income, expenditure on the treatment of respiratory diseases and workers in the family significantly influenced WTP. The rates of positive WTP and the monetary amount were also larger for men than for women. Unlike developed countries, most respondents regard air quality improvement as a government responsibility in that more than 40% of respondents had no incentive to bear the costs of attempting to achieve better air quality, indicating a relatively low environmental consciousness.     

Hypothetical and Real Economic Commitments,and Social Status,in Valuing a Species Protection Programme

There has been a long-running debate on the reliability and validity of the contingent valuation method, connected with the hypotheticality of the situation when respondents are asked to state their willingness to pay (WTP) for species protection (the so-called 'hypothetical bias'). Additionally, a number of recent arguments regarding donations to good causes and the benefits of achieving social status have questioned the motives of respondents who have stated their WTP. An experiment at the University of Klagenfurt tested for hypothetical bias by asking participants to state their hypothetical and real WTP for a species protection programme in the Hohe Tauern national park. Hypothetical and real WTP differed significantly. Additionally, it emerged that the pure ecological motive for stating a WTP might be concealed by arguments about donating in order to achieve social status and contributing to a good cause.     

Analysing Conflict between Cultural Heritage and Nature Conservation in the Australian Alps: A CVM Approach

The contingent valuation method (CVM) can be useful for assessing the non-market economic values associated with government land use decisions. A particular variant of CVM, which is based on dichotomous choice responses, has become widely used. Previous studies have employed a variety of techniques for analysing dichotomous choice CVM data to produce estimates of economic welfare changes. This paper summarizes these analytical options, and illustrates their application in a case study concerning cattle grazing on the Bogong High Plains in the Australian Alps. This case study is one of the few to assess the non-market economic value of cultural heritage conservation using contingent valuation, and is also unusual in that the competing values are both non-market in character. Nature conservation and heritage values were separately measured using two independent surveys. Mean willingness to pay for nature conservation and cultural heritage were estimated using a range of parametric and nonparametric methods.     

Revealing Preferences for Reductions of Public Risks: An Application of the CV Approach

In this paper the contingent valuation method (CVM) is applied to public risk reduction. Theory suggests that the size of the stated willingness to pay (WTP) for risk reduction depends on private activities aimed at reducing the risk level for the individual. The empirical results suggest that considering private averting activities increases the explanatory power of the estimated WTP function significantly. Thus, WTP passes the scope test which proposes that larger reductions from a larger baseline risk should be valued higher than lower risk reductions from a lower baseline risk. Furthermore, we demonstrate that the follow-up response format induces anchoring effects.     

Valuing welfare impacts of climate change in coastal areas: a French case study

Beach protection has become a major issue in reducing coastal risks (erosion and flooding). It is thus advisable to study residents’ preferences for mitigation strategies. Willingness-to-pay (WTP) by permanent and secondary residents for flood protection provided to properties by Languedoc-Roussillon beaches (French Mediterranean coast) is investigated by a contingent valuation study. Results show that WTP is more influenced by risk perception variables than by socio-economic ones. The WTP is then extrapolated on the basis of different adaptation strategies (laissez-faire, managed retreat, denial etc.) which provided information about expected damage associated with sea level rise at the 2100 time horizon.