Performance of different approaches in international benefit transfer: Insights from a nine country experiment

This paper investigates the performance of different approaches in international benefit transfer using data from identical and simultaneous contingent valuation surveys on marine water quality in nine European countries. The environmental good is shared by the study countries, but the countries differ substantially in their income levels and geography. We test the performance of three approaches: unit value transfer, unit value transfer with income elasticity adjustment, and function transfer. We find that at least in the case of international benefit transfers (when respondents’ mean incomes vary) unit value transfer with income elasticity adjustment performs the best, both in terms of mean absolute transfer errors and minimum tolerance levels for the equivalence of welfare measures. We argue that this approach should become a standard for quick and easy benefit transfer, and can serve as a baseline for comparisons with more complicated function transfers.