Labour as a utility measure reconsidered

Michael Ahlheim, Oliver Frör, Duc Nguyen, Antonia Rehl, Ute Siepmann and Pham Van Dinh

No 03-2017, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: In Stated Preference studies for the appraisal of environmental projects in poor countries or regions it often turns out that the stated willingness to pay of people for environmental improvements, which is used as measure of individual welfare changes, is very low. This is often interpreted as the result of extremely tight budget constraints, which make it impossible that people express their true appreciation of an environmental project in terms of their willingness to pay for it. Therefore, it is sometimes suggested to use labour contributions instead of money as a numeraire to measure utility in such studies. In this paper we show theoretically and empirically that this suggestion is not compatible with the principles of welfare theory because of several inconsistencies. We also illustrate the validity of our arguments empirically based on the results of a Contingent Valuation study conducted in a rural area in northern Vietnam.

Keywords: Contingent Valuation; Cost-benefit Analysis; Developing Countries; Public Expenditures; Vietnam; Willingness to work (search for similar items in EconPapers)
JEL-codes: D61 H43 Q51 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-env, nep-ppm, nep-sea and nep-upt
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Citations: View citations in EconPapers (2)

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