Title: Valuation 11: Benefit Transfer and Meta-Analysis
1Valuation 11 Benefit Transfer and Meta-Analysis
- Why benefit transfer?
- Different types of benefit transfer
- Value transfer
- Function transfer
- Validity and sources of error
- Examples
2Last 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
3What 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)
4Why 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?
5History
- 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
6Types 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
7The 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
8Value 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
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10Other 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
11Function 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
12Demand/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
13Example
- 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
14OLS regression, dependent variable is mean
WTP/HH/year, n667
15Validity 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)
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17Sources 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
18Meta-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
19Meta-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
20Example 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
21Wetlands/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
22Regression 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
23Wetlands/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
24Conclusion
- 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