Broberg, Thomas () (Department of Economics, Umeå University)
Abstract
This paper focuses on three important issues in estimating the relationship between WTP and income using contingent valuation: 1) the choice of income measure; 2) the modelling choice; and 3) the social context. Addressing the first two issues, a sensitivity analysis is performed. The results show that the estimated income-elasticity of WTP is fairly sensitive to different income measures and modelling assumptions and varies between 0.07 and 0.49 for the specific models estimated. The main conclusion drawn from the analysis is that inclusion of control variables for household characteristics is important for finding a significant income-effect, when the household income measure is used. No significant difference is found between gross or net income. The results further indicate that the relevant income measure may not only be the income level per se, but also the income level relative to others. The latter result is based on an experimental valuation question, conditioning the respondents on hypothetical changes in their absolute and relative income. The conclusion is that the social context read into the valuation situation influences the responses and, therefore, the estimated welfare measure.
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Publisher Info
Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number
723.
Length: 23 pages Date of creation: 16 Nov 2007 Date of revision: Handle: RePEc:hhs:umnees:0723
Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden Phone: 090 - 786 61 42 Fax: 090 - 77 23 02 Email: Web page: http://www.econ.umu.se/ More information through EDIRC
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Find related papers by JEL classification: C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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