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Using Choice Modeling to Investigate Equity Preferences

Benefit cost analysis (BCA) is a widely used method of assessing environmental policies. One of the limitations of BCA is the incorporation of equity considerations into an analysis. While this is theoretically possible through the application of distributional weights, this practice has not been generally adopted due to difficulties in determining appropriate weights. This paper suggests that one way of addressing the equity issue is through the application of a stated preference technique to the estimation of equity preferences. It is demonstrated that using choice modelling enables respondents’ equity preferences to be elicited and distributional weights suitable for application in BCA to be estimated.

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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2004_03.

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Length: 24 pages
Date of creation: 24 Nov 2004
Date of revision:
Handle: RePEc:dkn:econwp:eco_2004_03
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  1. Kjell Brekke & Hilde Lurå & Karine Nyborg, 1996. "Allowing disagreement in evaluations of social welfare," Journal of Economics, Springer, vol. 63(3), pages 303-324, October.
  2. R.K. Blamey & Mick S. Common & John C. Quiggin, 1995. "Respondents To Contingent Valuation Surveys: Consumers Or Citizens?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 39(3), pages 263-288, December.
  3. Roberts, Kevin W S, 1980. "Interpersonal Comparability and Social Choice Theory," Review of Economic Studies, Wiley Blackwell, vol. 47(2), pages 421-39, January.
  4. Medin, Hege & Nyborg, Karine & Bateman, Ian, 2001. "The assumption of equal marginal utility of income: how much does it matter?," Ecological Economics, Elsevier, vol. 36(3), pages 397-411, March.
  5. Robin Boadway & Michael Keen, 1999. "Redistribution," Working Papers 983, Queen's University, Department of Economics.
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  8. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
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  10. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-30, January.
  11. Sen, Amartya, 2000. "Social justice and the distribution of income," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 1, pages 59-85 Elsevier.
  12. Nash, Christopher A & Pearce, David W & Stanley, John K, 1975. "An Evaluation of Cost-Benefit Analysis Criteria," Scottish Journal of Political Economy, Scottish Economic Society, vol. 22(2), pages 121-34, June.
  13. Blamey, Russell K. & Gordon, Jenny & Chapman, Ross, 1999. "Choice modelling: assessing the environmental values of water supply options," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(3), September.
  14. Roe, Brian & Boyle, Kevin J. & Teisl, Mario F., 1996. "Using Conjoint Analysis to Derive Estimates of Compensating Variation," Journal of Environmental Economics and Management, Elsevier, vol. 31(2), pages 145-159, September.
  15. Harberger, Arnold C, 1978. "On the Use of Distributional Weights in Social Cost-Benefit Analysis," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages S87-120, April.
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  17. Adamowicz W. & Louviere J. & Williams M., 1994. "Combining Revealed and Stated Preference Methods for Valuing Environmental Amenities," Journal of Environmental Economics and Management, Elsevier, vol. 26(3), pages 271-292, May.
  18. Roberts, Kevin W S, 1980. "Possibility Theorems with Interpersonally Comparable Welfare Levels," Review of Economic Studies, Wiley Blackwell, vol. 47(2), pages 409-20, January.
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  20. Giles Atkinson & Fernando Machado & Susana Mourato, 2000. "Balancing competing principles of environmental equity," Environment and Planning A, Pion Ltd, London, vol. 32(10), pages 1791-1806, October.
  21. Nyborg, Karine, 2000. "Homo Economicus and Homo Politicus: interpretation and aggregation of environmental values," Journal of Economic Behavior & Organization, Elsevier, vol. 42(3), pages 305-322, July.
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