TY - JOUR
T1 - Appropriate payment vehicles in stated preference studies in developing economies
AU - Hassan, Suziana
AU - Olsen, Søren Bøye
AU - Thorsen, Bo Jellesmark
PY - 2018
Y1 - 2018
N2 - Selecting appropriate payment vehicles is critical for the perceived consequentiality and incentive compatibility of stated preferences surveys. We analyze the performance of three different payment vehicles in a Malaysian case of valuing wetland conservation. Two are well-known: voluntary donations and income taxes. The third is new: reductions in government subsidies for daily consumer goods. Using donations is common, but this payment vehicle is prone to issues of free-riding. An income tax usually has favorable properties and is commonly used in environmental valuation. However, in Malaysia as well as in many other low- to middle-income economies, large proportions of people do not pay income taxes, putting the validity of this payment vehicle into question. Instead, citizens in Malaysia and many other countries benefit from subsidies for a range of consumer goods. We find that price sensitivity is higher and the unexplained variance smaller when using subsidies rather than donations or income taxes. Importantly, this approach translates into completely different conclusions concerning policy advice. Our results suggest that in developing countries, using reduced subsidies as a payment vehicle may have favorable properties in terms of improved payment consequentiality compared to alternative payment vehicles, thus enhancing the external validity of stated preference surveys.
AB - Selecting appropriate payment vehicles is critical for the perceived consequentiality and incentive compatibility of stated preferences surveys. We analyze the performance of three different payment vehicles in a Malaysian case of valuing wetland conservation. Two are well-known: voluntary donations and income taxes. The third is new: reductions in government subsidies for daily consumer goods. Using donations is common, but this payment vehicle is prone to issues of free-riding. An income tax usually has favorable properties and is commonly used in environmental valuation. However, in Malaysia as well as in many other low- to middle-income economies, large proportions of people do not pay income taxes, putting the validity of this payment vehicle into question. Instead, citizens in Malaysia and many other countries benefit from subsidies for a range of consumer goods. We find that price sensitivity is higher and the unexplained variance smaller when using subsidies rather than donations or income taxes. Importantly, this approach translates into completely different conclusions concerning policy advice. Our results suggest that in developing countries, using reduced subsidies as a payment vehicle may have favorable properties in terms of improved payment consequentiality compared to alternative payment vehicles, thus enhancing the external validity of stated preference surveys.
KW - Developing countries
KW - Discrete choice experiment
KW - Incentive compatibility
KW - Payment consequentiality
KW - Random parameter logit model
KW - Wetland conservation
U2 - 10.1007/s10640-017-0196-6
DO - 10.1007/s10640-017-0196-6
M3 - Journal article
AN - SCOPUS:85037747830
SN - 0924-6460
VL - 71
SP - 1053
EP - 1075
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
IS - 4
ER -