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Valuation 11: Benefit Transfer and Meta-Analysis

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Valuation 11: Benefit Transfer and Meta-Analysis Why benefit transfer? Different types of benefit transfer Value transfer Function transfer Validity and sources of error – PowerPoint PPT presentation

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Title: Valuation 11: Benefit Transfer and Meta-Analysis


1
Valuation 11 Benefit Transfer and Meta-Analysis
  • Why benefit transfer?
  • Different types of benefit transfer
  • Value transfer
  • Function transfer
  • Validity and sources of error
  • Examples

2
Last weeks we looked at
  • Various methods to estimate the value of
    environmental goods and services not traded on
    markets
  • Also, some empirical examples were shown
  • It turned out that it is actually very hard to
    reliably estimate prices one needs many
    assumptions, good data, and smart statistics, and
    even then all sorts of things may go wrong

3
What is benefit transfer?
  • Benefit transfer uses economic information
    captured at one place and time to make inferences
    about the economic value of environmental goods
    and services at another place and time
  • Benefit transfer involves economic values that
    may be either positive (benefits) or negative
    (costs)

4
Why benefit transfer?
  • Valuation is hard
  • As a result, applied valuation studies are
    expensive
  • A small hedonic pricing study, for instance,
    costs about a year of a PhD student that is,
    after the data have been collected and digitised
  • Ditto for travel costs
  • A contingent valuation study is more expensive
  • Monetary values are also hard needed
  • Wouldn't it, therefore, be nice if we could take
    the estimated values of case 1 and apply them to
    case 2?

5
History
  • Environmental benefit transfer came into being
    only once the non-market literature itself grew
    large enough to allow comprehensive synthesis and
    cross-study comparison
  • In 1973, the U.S. Water Resources Council began
    publishing unit day estimates for recreation
    activities relates to water projects
  • In 1980, the U.S. Forest Service began publishing
    Resources Planning Act values for recreation (per
    person per day)
  • First synthesis study mid to late 1980s
  • Today, applied to issues involving values for
    recreation, water quality, fishing, air quality,
    wetlands, biodiversity

6
Types of BT
Value Transfer
Function Transfer
Meta-Analysis Function
Single point transfer
Measure of central tendency
Single point transfer adm. approved
Benefit/ Demand Function
Adapt function to policy site
Use estimate at policy site
Use tailored estimate at policy site
7
The basis for any benefit transfer analysis
  • The basis is a formal literature review
  • The original research studies are screened for
  • relevance
  • how well they correspond to the policy context
  • the quality of research
  • what kind of information is provided
  • Advantages include a much larger sample of data,
    different analytical techniques, and different
    analysts
  • The main disadvantage is that one typically only
    has access to published results, which are always
    incomplete

8
Value transfer Point estimates
  • Point estimate transfer typically uses a single
    measure
  • Example The U.S. Army Corps of Engineers was
    considering the removal of four dams on the Lower
    Snake River from its confluence with the Columbia
    River
  • One of the benefits would be the restoration of
    spawning habitat for native salmon populations
    (by about 47,500 fish)
  • The agency was interested in the passive use
    value based on per household annual WTP
  • The literature search found four studies that
    provided values for salmon population

9
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10
Other value transfer
  • The measure of central tendency entails using a
    mean, median or other measures of central
    tendency based on all or a subset of original
    research outcomes
  • Same example as above great disparity between
    average marginal passive use value (40,620) and
    median value (3,197)
  • Administratively approved estimate transfer is
    the simplest approach
  • Estimates are derived from empirical evidence in
    the literature, expert judgment, and political
    screening
  • Problems Criteria for political screening are
    unknown, selection might be biased and only
    updated every so often

11
Function transfer
  • Value transfer requires a strong similarity
    between the study site and the policy site is
    required
  • Function transfers are generally considered to
    perform better than value transfers
  • Unlike value transfers, they may be tailored to
    fit some of the characteristics of the policy
    site
  • Function transfers entails the application of a
    statistical function that relates the summary
    statistics of original research to the specifics
    of the study site
  • There are two types of function transfers
  • Demand/Benefit function transfer
  • Meta-regression analysis

12
Demand/benefit function transfer
  • For benefit function transfer additional
    information is required
  • We need a function that models the statistical
    relationship between the summary measures of
    interest and characteristics of the original site
  • This function is then adjusted to specific
    characteristics of the policy site

13
Example
  • Case study by VandenBerg, Poe and Powell (2001)
    estimates the benefits of improving groundwater
    quality used for drinking to a very safe level in
    12 towns in New York, Massachusetts, and
    Pennsylvania
  • The authors use a contingent valuation survey
    with a payment card question format
  • To perform the benefit function transfer all of
    the survey data except for one town are pooled
    and a WTP equation is estimated

14
OLS regression, dependent variable is mean
WTP/HH/year, n667
15
Validity of benefit transfer
  • A number of studies performed the following test
    Estimate the value of something at two sites, and
    predict the value of the one site from the
    observations of the other
  • Resources or activities include
  • Sport fishing (distance, harvest, quality)
  • Recreation (costs, size, substitutes, population,
    age)
  • Rafting (flow, costs, intensity, reason for
    visit, home, income, sex, age, education)
  • Water quality (costs, size, depth, accessibility,
    quality, use, income)
  • Water quality (bid, use, education, age, user)

16
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17
Sources of error
  • Generalisation error
  • When estimates from study sites are adapted to
    represent different policy sites
  • The error is inversely related to the degree of
    correspondence between the sites
  • Measurement error
  • Occurs when researchers decision affect the
    accuracy of the transferability of values
  • Methodological choices, non-reporting of study
    characteristics
  • Publication selection error
  • There is a preference for publishing
    statistically significant results that conform
    theoretical expectations
  • Authorship effect

18
Meta-regression analysis
  • A drawback of the demand function transfer is the
    assumption that the statistical relationship
    between the dependent and independent variables
    are the same for both study as well as policy
    site
  • Also, demand function transfer relies mostly on a
    single study
  • Meta-regression analysis summarises and syntheses
    outcomes from several studies
  • Meta-analysis not only provides a rigorous
    synthesis of the literature, it is also able to
    explain the variation found across empirical
    studies and to identify outlier studies,
    knowledge gaps, and priors for further analysis
  • Meta-analysis is a technique that originates in
    medical science

19
Meta-regression analysis (2)
  • Some of the variation in value estimates may be
    due to identifiable characteristics among the
    different studies themselves
  • valuation method, survey mode, geographic
    location, time etc.
  • These characteristics are not explanatory
    variables in the original studies as they are
    constant
  • Advantage of the method it does not prejudge
    research findings on the basis of the original
    studys quality (input) , while it avoids a
    differential subjective weighting of studies in
    the interpretation of findings (output side)
  • However, the publication selection error still
    applies

20
Example Meta-regression analysis
  • Brouwer, Langford, Bateman and Turner (1999) is
    one of the early applications of meta-regression
    analysis
  • Analysis covers 30 studies of the WTP per person
    for wetland preservation in temperate climate
    zones in developed economies in North America and
    Europe
  • In total, 103 data points as some studies
    reported more than one observation (split sample)
  • Wetlands were made comparable by looking at their
    types and functions flood control, water supply,
    water purification, and nature/recreation
  • Each observation was associated with one or more
    functions

21
Wetlands/Brouwer
  • Additional explanatory variables included
  • payment vehicle (tax or other)
  • elicitation format (open-ended or other)
  • value type (use value, non-use value or both)
  • country (USA or Canada, Europe)
  • Quality was measured by response rate, but as an
    explanatory variable
  • All studies are CVM studies
  • In the regression analysis wetland size and
    income were excluded due to data availability

22
Regression results
GLS model specification
Parameter Estimate Standard error
Payment vehicle (tax) 1.576 0.362
Elicitation (open-ended) -0.376 0.183
Country (North America) 1.629 0.363
Response rate 30-50 -1.722 0.451
Response rate gt50 -1.461 0.450
Flood control 1.134 0.456
Water supply 0.441 0.479
Purification 0.659 0.327
significant at 0.001 significant at 0.01
significant at 0.05 R2 0.38
23
Wetlands/Brouwer (2)
  • On average, people are willing to pay
    93/person/year for wetland preservation
  • Note that the median is only 51
  • Taxes attract higher contributions
  • Open ended questions lead to smaller answers
  • North Americans are willing to pay more
  • Higher response rates imply lower values
  • Less differences between functionality of wetlands

24
Conclusion
  • Benefit transfer can perform no better than the
    quality of original studies
  • The underlying questions of accuracy and
    appropriateness of non-market methods are not
    solved in benefit transfer
  • However, some type of benefit estimates are
    subject to less controversy
  • Benefit transfers are defensible as long as they
    are based on organised research agenda and seek
    to expand knowledge
  • Theres a great deal of pragmatism in
    policy-decision making not all decisions
    require the same level of accuracy
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