Testing structural benefit transfer: The role of income inequality

Jasper N. Meya, Moritz Drupp and Nick Hanley

Resource and Energy Economics, 2021, vol. 64, issue C

Abstract: How the valuation of environmental goods is related to income is a key question for economics, but the role of income inequality is often neglected. We study how income inequality affects the international transfer of the estimated value of environmental goods from a study to a policy site—a practice called value or benefit transfer. Specifically, we apply theory-driven, structural transfer factors to test whether adjusting for income inequality affects errors made in benefit transfer, drawing on a multi-country valuation study on water quality improvement. Our convergent validity analysis shows that the structural income inequality adjustment reduces benefit transfer errors by between 1.5 and 1.8 percentage points on average across all transfers. We therefore find that adjusting for income inequality offers only a minor improvement of benefit transfers as compared to adjusting for differences in mean income. Overall, our results shed light on the potential of structural approaches to benefit transfer for environmental valuation and public policy appraisal.

Keywords: Structural benefit transfer; Environmental valuation; Income inequality; Transfer error; Income elasticity; Willingness-to-pay (search for similar items in EconPapers)
JEL-codes: D31 D61 D63 H43 Q25 Q51 Q53 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:64:y:2021:i:c:s0928765521000026

DOI: 10.1016/j.reseneeco.2021.101217

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