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Public distrust and valuation biases: Identification and calibration with contingent valuation studies of two air quality improvement programs in China

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  • Wang, Hua
  • He, Jie
  • Huang, Desheng

Abstract

Economic valuation can be biased by public distrust in local institutions when those institutions are involved in the valuation scenario design, which is often the case for contingent valuation (CV) studies. To better identify and to calibrate the potential biases, we conduct two CV surveys on people's willingness to pay (WTP) for the implementation of new air quality improvement programs at the municipality level in China. A joint selection modeling strategy is developed and employed to identify the potential biases in WTP estimations caused by people's ex-ante distrust in local institutions. The results show the various channels through which the distrust in local institutions affects people's WTP between two cities. For one city, the distrust in local institutions significantly increases the probability of one protesting the new program, which results in an underestimation of WTP by 16%. For the other city, the distrust in local institutions leads to a lower estimation of WTP by 26%, mostly via the determination function.

Suggested Citation

  • Wang, Hua & He, Jie & Huang, Desheng, 2020. "Public distrust and valuation biases: Identification and calibration with contingent valuation studies of two air quality improvement programs in China," China Economic Review, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x20300213
    DOI: 10.1016/j.chieco.2020.101424
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    2. Perni, Ángel & Barreiro-Hurlé, Jesús & Martínez-Paz, José Miguel, 2021. "Contingent valuation estimates for environmental goods: Validity and reliability," Ecological Economics, Elsevier, vol. 189(C).
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