Are WTP Estimates for Wildfire Risk Reductions Transferrable from Coast to Coast? Results of a Choice Experiment in California and Florida

John Loomis, Jose Sanchez, Armando Gonzalez-Caban and Thomas Holmes

No 202661, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: With increasingly large expenditures of public funds being spent to reduce the severity of wildfires around homes, officials and legislators are often interested in knowing the economic benefits these funds provide. However, agencies often do not have funding or expertise to conduct individual state specific benefit estimates, and often rely upon benefit transfer (BT) estimates. We calculate the BT error for transferring California homeowner benefit estimates to Florida and vice-versa for public and private fire risk reduction programs. We use the same choice experiment survey and the same specification of the mixed logit model in both states. In terms of accuracy of benefit transfer, among homeowners that perceive low to moderate fire risk, transferring willingness to pay (WTP) from CA to FL or FL to CA for the Public Program to reduce wildfire risk yields a large BT error (-33.1% to 51.8%). However, these large BT errors for the Public Program become smaller (-23.3% to +30.4%) when the benefit transfer focuses on those homeowners with high risk perceptions of wildfire in their neighborhood. In contrast, the opposite pattern is found for the Private Program. There are low BT errors when transferring WTP for the Private Program to reduce risk (-4.4% to 4.8%) between CA and FL homeowners that perceive low to moderate fire risk. But for high risk perceiving homeowners WTP for the Private Program to reduce wildfire risk immediately around their home has a much larger BT error (-16.4% to 31.8%). While our range of BT errors are generally less than found in the BT convergent validity literature, our BT errors are still higher than expected given the same methodology is used in both states, and the homeowners in the two states report similar effects of wildfires and perceived risk. It is hypothesized that the considerable differences between homeowner demographics in the two states may be contributing to the BT errors.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 25
Date: 2015-04-27
New Economics Papers: this item is included in nep-dcm and nep-env
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:202661

DOI: 10.22004/ag.econ.202661

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