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Modelling the Non-market Environmental Costs and Benefits of Biodiversity Projects Using Contingent Valuation Data

  • Douglas Macmillan

    ()

  • Elizabeth Duff
  • David Elston
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    CV studies rarely ask willingness to accept (WTA)questions, yet there are a range of environmentalprojects where there are likely to be potential losersas well as gainers. This paper presents evidence fromsix biodiversity projects that the inclusion ofcontingent compensation payments from thoserespondents who preferred the status quo cansubstantially reduce net project benefits, even whenthe proportion of losers is relatively small. Astatistical model for estimating the mean welfaremeasure from dichotomous choice data which allows forboth positive WTP, zero WTP, and WTA is described. Asmany environmental projects are likely to create bothgainers and losers, we recommend that CV analysts giveserious consideration to the collection and analysisof WTA data otherwise they risk generating biasedestimates of project benefits. Copyright Kluwer Academic Publishers 2001

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    File URL: http://hdl.handle.net/10.1023/A:1011169413639
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    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 18 (2001)
    Issue (Month): 4 (April)
    Pages: 391-410

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    Handle: RePEc:kap:enreec:v:18:y:2001:i:4:p:391-410
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    1. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
    2. Carson, R.T. & Mitchell, R.C. & Hanemann, W.M. & Kopp, R.J. & Presser, S. & Ruud, P.A., 1992. "A Contingent Valuation Study of Lost Passive Use Values Resulting From the Exxon Valdez Oil Spill," MPRA Paper 6984, University Library of Munich, Germany.
    3. Macmillan, Douglas & Hanley, Nick & Buckland, Steve, 1996. "A Contingent Valuation Study of Uncertain Environmental Gains," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(5), pages 519-33, November.
    4. Göran Bostedt & Mattias Boman, 1996. "Nonresponse in Contingent Valuation-reducing uncertainty in value inference," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 8(1), pages 119-124, July.
    5. Knetsch, Jack L., 1992. "Preferences and nonreversibility of indifference curves," Journal of Economic Behavior & Organization, Elsevier, vol. 17(1), pages 131-139, January.
    6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
    7. Cooper Joseph C., 1993. "Optimal Bid Selection for Dichotomous Choice Contingent Valuation Surveys," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 25-40, January.
    8. Nick Hanley & Douglas MacMillan & Robert E. Wright & Craig Bullock & Ian Simpson & Dave Parsisson & Bob Crabtree, 1998. "Contingent Valuation Versus Choice Experiments: Estimating the Benefits of Environmentally Sensitive Areas in Scotland," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(1), pages 1-15.
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