Accounting for subsistence needs in non-market valuation: a simple proposal

Victor Champonnois and Olivier Chanel

Journal of Environmental Planning and Management, 2023, vol. 66, issue 5, 1037-1060

Abstract: Revealed and stated preference techniques are widely used to assess willingness to pay (WTP) for non-market goods as input to public and private decision-making. However, individuals first have to satisfy subsistence needs through market good consumption, which affects their ability to pay. We provide a methodological framework and derive a simple ex post adjustment factor to account for this effect. We quantify its impacts on the WTP for non-market goods and the ranking of projects theoretically, numerically and empirically. This confirms that non-adjusted WTP tends to be plutocratic: the views of the richest – whatever they are – are more likely to impact decision-making, potentially leading to ranking reversal between projects. We also suggest that the subsistence needs-based adjustment factor we propose has a role to play in value transfer procedures. The overall goal is a better representation of the entire population’s preferences with regard to non-market goods.

Date: 2023
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Working Paper: Accounting for subsistence needs in non-market valuation: a simple proposal (2023)
Working Paper: Accounting for subsistence needs in non-market valuation: A simple proposal (2021)
Working Paper: Accounting for subsistence needs in non-market valuation: A simple proposal (2021)
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DOI: 10.1080/09640568.2021.2008884

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