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 - Gestion de l'Eau, Acteurs, Usages - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - IRD - Institut de Recherche pour le Développement - AgroParisTech - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement

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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)
Date: 2021-11-03
New Economics Papers: this item is included in nep-dcm and nep-ppm
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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)
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