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

Victor Champonnois () and Olivier Chanel
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Victor Champonnois: UMR G-EAU, Montpellier, France., http://www.g-eau.fr/index.php/en/

No 2142, AMSE Working Papers from Aix-Marseille School of Economics, France

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.

Keywords: subsistence needs; adjustment factor; non-market valuation; value transfer; population's preferences (search for similar items in EconPapers)
JEL-codes: D60 D70 Q51 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2021-11
New Economics Papers: this item is included in nep-dcm, nep-env and nep-ppm
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Related works:
Journal Article: 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 (2023)
Working Paper: Accounting for subsistence needs in non-market valuation: A simple proposal (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2142

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