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Economic valuation of flood risk exposure and reduction in a severely flood prone developing country

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  • BROUWER, ROY
  • AKTER, SONIA
  • BRANDER, LUKE
  • HAQUE, ENAMUL

Abstract

This paper presents the results of a dichotomous choice contingent valuation (CV) study of reduced flood risks in Bangladesh. Sensitivity of willingness to pay (WTP) to varying risk exposure levels is tested in a ‘natural experiment’, targeting floodplain residents facing regular annual flooding and a disaster flood once every five to ten years. Accounting for price, income and education levels, both subjective risk aversion and objective baseline risk exposure affect stated WTP for a common level of flood protection. We find a number of problems with the CV application in this specific developing country context. Half of the respondents are unable to pay in financial terms, but are willing to contribute in kind. The combined use of a monetary and non-monetary measure of WTP would have lowered the number of zero bids considerably. A test-retest carried out six months after the original survey shows that the stated WTP values are reliable.

Suggested Citation

  • Brouwer, Roy & Akter, Sonia & Brander, Luke & Haque, Enamul, 2009. "Economic valuation of flood risk exposure and reduction in a severely flood prone developing country," Environment and Development Economics, Cambridge University Press, vol. 14(3), pages 397-417, June.
    • Handle: RePEc:cup:endeec:v:14:y:2009:i:03:p:397-417_00
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    1. Hagedoorn, L.C. & Bubeck, P. & Hudson, P. & Brander, L.M. & Pham, M. & Lasage, R., 2021. "Preferences of vulnerable social groups for ecosystem-based adaptation to flood risk in Central Vietnam," World Development, Elsevier, vol. 148(C).
    2. Sonia Akter & Roy Brouwer & Saria Choudhury & Salina Aziz, 2009. "Is there a commercially viable market for crop insurance in rural Bangladesh?," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 215-229, March.
    3. Joseph Cook & Marc Jeuland & Brian Maskery & Dale Whittington, 2012. "Giving Stated Preference Respondents “Time to Think”: Results From Four Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 473-496, April.
    4. Mehmet Kutluay & Roy Brouwer & Haripriya Gundimeda & Nitin Lokhande & Richard S. J. Tol, 2017. "Public preferences and valuation of new malaria risk," Working Paper Series 1917, Department of Economics, University of Sussex Business School.
    5. Allan Beltrán & David Maddison & Robert J. R. Elliott, 2018. "Assessing the Economic Benefits of Flood Defenses: A Repeat‐Sales Approach," Risk Analysis, John Wiley & Sons, vol. 38(11), pages 2340-2367, November.
    6. Botzen, W.J.W. & van den Bergh, J.C.J.M., 2012. "Risk attitudes to low-probability climate change risks: WTP for flood insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 151-166.
    7. Ahmadiani, Mona & Ferreira, Susana, 2016. "Well-being Effects of Extreme Weather Events in the US," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236259, Agricultural and Applied Economics Association.
    8. Edward B. Barbier, 2016. "The Protective Value of Estuarine and Coastal Ecosystem Services in a Wealth Accounting Framework," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(1), pages 37-58, May.
    9. Stefano Balbi & Carlo Giupponi & Roland Olschewski & Vahid Mojtahed, 2013. "The economics of hydro-meteorological disasters: approaching the estimation of the total costs," Working Papers 2013-12, BC3.
    10. Kuller, M. & Beutler, P. & Lienert, J., 2023. "Preference change in stakeholder group-decision processes in the public sector: Extent, causes and implications," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1268-1285.
    11. Hao Hong Do & Oliver Frör, 2022. "River Ecosystem Resilience: Applying the Contingent Valuation Method in Vietnam," Sustainability, MDPI, vol. 14(19), pages 1-19, September.
    12. Balbi Stefano & Giupponi Carlo & Mojtahed Vahid & Olschewski Roland, 2015. "The Total Cost of Water-Related Disasters," Review of Economics, De Gruyter, vol. 66(2), pages 225-252, August.
    13. Roberto Ponce & Felipe Vásquez & Alejandra Stehr & Patrick Debels & Carlos Orihuela, 2011. "Estimating the Economic Value of Landscape Losses Due to Flooding by Hydropower Plants in the Chilean Patagonia," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 25(10), pages 2449-2466, August.
    14. Mark J. Koetse & Roy Brouwer, 2016. "Reference Dependence Effects on WTA and WTP Value Functions and Their Disparity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(4), pages 723-745, December.
    15. Beltrán, Allan & Maddison, David & Elliott, Robert J R, 2018. "Is Flood Risk Capitalised Into Property Values?," Ecological Economics, Elsevier, vol. 146(C), pages 668-685.
    16. Bikram Manandhar & Shenghui Cui & Lihong Wang & Sabita Shrestha, 2023. "Urban Flood Hazard Assessment and Management Practices in South Asia: A Review," Land, MDPI, vol. 12(3), pages 1-29, March.
    17. Veronesi, Marcella & Chawla, Fabienne & Maurer, Max & Lienert, Judit, 2014. "Climate change and the willingness to pay to reduce ecological and health risks from wastewater flooding in urban centers and the environment," Ecological Economics, Elsevier, vol. 98(C), pages 1-10.
    18. Ahmadiani, Mona & Ferreira, Susana, 2021. "Well-being effects of extreme weather events in the United States," Resource and Energy Economics, Elsevier, vol. 64(C).
    19. Zandersen, Marianne & Oddershede, Jakob Stoktoft & Pedersen, Anders Branth & Nielsen, Helle Ørsted & Termansen, Mette, 2021. "Nature Based Solutions for Climate Adaptation - Paying Farmers for Flood Control," Ecological Economics, Elsevier, vol. 179(C).
    20. Perrings, Charles, 2014. "Environment and development economics 20 years on," Environment and Development Economics, Cambridge University Press, vol. 19(3), pages 333-366, June.
    21. Roy Brouwer & Marije Schaafsma, 2013. "Modelling risk adaptation and mitigation behaviour under different climate change scenarios," Climatic Change, Springer, vol. 117(1), pages 11-29, March.
    22. Dasgupta, Susmita & Wheeler, David & Bandyopadhyay, Sunando & Ghosh, Santadas & Roy, Utpal, 2022. "Coastal dilemma: Climate change, public assistance and population displacement," World Development, Elsevier, vol. 150(C).
    23. James I. Price & Patrick R. Lloyd-Smith & Diane P. Dupont & Wiktor L. Adamowicz, 2019. "Floods and Water Service Disruptions: Eliciting Willingness-to-Pay for Public Utility Pricing and Infrastructure Decisions," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-20, April.

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