Study on Benefit Transfer in an International Setting. How to Improve Welfare Estimates in the Case of the Countries' Income Heterogeneity?

The paper aims at investigating the validity of benefit transfer in the case of transfers between countries highly heterogeneous in income, and demonstrates relative performance of different benefit transfer methods under these conditions. We examine how income elasticity of WTP varies in line with the levels of income in order to provide scientifically sound elasticity factor for adjusting transferred welfare estimates. In addition, we have noted that using site-specific measures of income substantially outperforms transfers based on GPD per capita. The results provide conclusions for the future benefit transfers between countries differentiated by income. The accuracy of benefit transfer is compared using equivalence testing following the TOSC test; a new, more informative way of reporting equivalence is proposed and developed, based on computing minimum tolerance level rather than specifying it a priori. The empirical studies are one of the first applications of virtually the same study settings and questionnaires in an environmental quality context, what supplements a few previously existing applications in health effects settings. Lake water quality valuation studies were conducted in two countries in transition – Poland and the Czech Republic – that reflected the earlier studies carried out in Norway and Germany. The use of the same questionnaires and scenarios allowed to control for survey artefacts that could possibly bias the willingness to pay. The welfare estimates collected at four different sites provided a wide base for testing the benefit transfer and comparing the performance of methods to improve the transfer accuracy. Finally, the guidelines for future applications have been offered, as particularly valuable for benefit transfers between countries highly heterogeneous in income.