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Benefit Transfers with Latent Class Models: Air Pollution Risk Management of Power Plants in China


  • Taro Ohdoko

    () (Graduate School of Economics, Kobe University)

  • Satoru Komatsu

    (Graduate School for International Development and Cooperation, Hiroshima University)

  • Shinji Kaneko

    (Graduate School for International Development and Cooperation, Hiroshima University)


We examine the benefit transfer of air quality improvement using latent class model (LCM) in China. We conduct Contingent rankings (CR) to estimate the implicit price of reducing health risk related to the air pollution of power plants. CR results are analyzed using random parameter logit model (RPL) and LCM with repeated choice data. Then, we conduct benefit transfer (BT) functions to alleviate transfer errors of the implicit price in accordance with conventional BT studies. Moreover, we investigate whether BT with LCM improves transferability of benefits because of incorporating the membership function, which is consisted of psychological attitudes of respondents, into estimating the implicit price. As a result, we show that variables on psychological attitudes improve the transferability of the implicit price more than socioeconomic characteristics. We concluded that BT be used along with more information about residents, such as psychological attitudes. We also advocate that uniform psychological survey protocols and an associated database would contribute to performance improvements in BT and therefore to assessment of environmental policies in China.

Suggested Citation

  • Taro Ohdoko & Satoru Komatsu & Shinji Kaneko, 2010. "Benefit Transfers with Latent Class Models: Air Pollution Risk Management of Power Plants in China," Discussion Papers 1003, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1003

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    References listed on IDEAS

    1. Alberto Alesina & Robert J. Barro, 2002. "Currency Unions," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 409-436.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. J. Peter Neary, 2009. "Putting the "New" into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
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    More about this item


    latent class model; benefit transfer; air pollution risk; psychological attitude; membership function;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation


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