Browsing by Subject "Cost-benefit analysis"

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Animal welfare in non-anthropocentric cost-benefit analysis and social welfare functions: A critical review to guide practical application
(2024-10) Dusel, Sara; Wieck, Christine
Cost-benefit analysis and social welfare functions are two closely related methods to evaluate impacts of policies on humans (producers, consumers etc.) and animals. In cost-benefit analysis, the impacts on animals are currently either disclosed as intangible impacts or monetised from the human (anthropocentric) perspective through production costs, revenues and willingness to pay. Social welfare functions are more flexible to aggregate and trade-off impacts on animals, but they are not yet applied in practice. In the literature, advances have been made to monetise policy impacts from the animals’ (non-anthropocentric) perspective and to include animals in social welfare functions. Yet, policy analysts who seek to implement any of these approaches in practice face substantial challenges because the available studies differ considerably in the methodologies and underlying normative assumptions. We conduct a critical review of the scientific and grey literature with the aim to synthesise the available material, to facilitate an informed debate on conflicting normative assumptions, and to eventually guide the practical application of non-anthropocentric cost-benefit analysis and social welfare functions. The results of the critical review are presented in the form of a checklist that allows to better comprehend key steps of the methodologies. Step-by-step, the checklist gives an overview of the alternative options and normative assumptions in the literature, and points to any remaining research gaps. Beside the academic debate, this is relevant for practical policy analysts who need to make methodological choices for their policy questions at hand.
Contingent valuation and money attitudes
(2015) Pelz, Sonna; Ahlheim, Michael
The Contingent Valuation Method (CVM) is one of the most frequently applied techniques to assess and monetise the benefits of environmental improvements. This survey-based method aims to elicit individuals’ willingness to pay (WTP) for enhanced environmental quality by means of hypothetical payment questions. Analysts interpret stated WTP as the monetary equivalent of the utility gain an individual expects to experience due to a specific environmental improvement. In spite of its frequent use, the validity of WTP statements is recurrently questioned and analysts have pointed to several sources of bias, such as a poor CVM survey design or certain characteristics of the respondents. This dissertation focuses on respondent characteristics which hitherto have not been examined, namely individuals’ attitudes towards spending money in general. The disposition of a person to spend money is expected to systematically affect and possibly bias stated WTP. While money attitudes have been extensively studied in psychological research, they have never been considered to be of influence in the context of environmental valuation. Given this lack of research, this dissertation investigates, theoretically and empirically, the role of money attitudes in CVM surveys.
Drinking and protecting - a market approach to the preservation of cork oak landscapes
(2010) Frör, Oliver; Ahlheim, Michael
With the availability of new techniques to close wine bottles avoiding the risk of ?corky? taste the tradition of closing wine bottles with cork stoppers is on the retreat. As a consequence the Mediterranea cork oak forests with their rich biodiversity are endangered since their cultivation is not profitable anymore. This paper explores the viability of a market approach to the preservation of these ecologically valuable landscapes. In an internet-based Contingent Valuation survey we assess wine consumers' willingness to pay a higher price for wine bottles closed with high-quality cork stoppers instead of buying wine with alternative stoppers in order to preserve the cork oak landscapes. We find that though many wine consumers have experience with tainted wine they are, nevertheless, willing to buy wine with (highquality) cork stoppers at higher prices. Their average WTP is, however, not sufficient to cover the additional costs of these stoppers. Thus, we propose a financing mix of market returns and government subsidies for preserving the cork oaks. As a precondition for this market approach to be successful bottles with high-quality cork stoppers must be clearly identifiable in the shops, and consumers must be informed about the ecological consequences of supporting the cork production.
Labour as a utility measure in contingent valuation studies : how good is it really?
(2010) Ahlheim, Michael; Frör, Oliver; Heinke, Antonia; Duc, Nguyen Minh; Van Dinh, Pham
The Contingent Valuation Method (CVM) aims at the assessment of people's willingness to pay (WTP) for a public project. The sum of the individual WTPs is interpreted as the social benefits of the project under consideration and compared to the project costs. If the benefits exceed the costs the project is recommended for realization. In very poor societies budgets are so tight that households cannot give up any part of their income, i.e. of their market consumption, in favour of a public project, so that their WTP for that project stated in a CVM interview has to be zero or close to zero. This leads to a severe discrimination against poor regions in the decision process on the allocation of public funds. Therefore, several authors suggest to use labour contributions to the realization of a public project instead of monetary contributions as a measure of people's WTP for that project. In this paper we show theoretically and empirically, based on a CVM study conducted in Vietnam, that labour is severely flawed as a measuring rod for individual utility so that CVM based on labour contributions does not provide a reliable and meaningful decision rule for the allocation of public projects.
Labour as a utility measure reconsidered
(2017) Pham, Van Dinh; Ahlheim, Michael; Frör, Oliver; Nguyen, Minh Duc; Rehl, Antonia; Siepmann, Ute
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.
Potential impacts of iron biofortification in India
(2006) Bhutta, Zulfiqar A.; Stein, Alexander J.; Qaim, Matin; Meenakshi, J. V.; Nestel, Penelope; Sachdev, H. P. S.
Iron deficiency is a widespread nutritional problem in developing countries, causing impaired physical activity and cognitive development, as well as maternal mortality. Although food fortification and supplementation programmes have been effective in some countries, their overall success remains limited. Biofortification, that is, breeding crops for higher micronutrient content, is a relatively new approach. We propose a methodology for ex-ante impact assessment of iron biofortification, which builds on disability-adjusted life years (DALYs) and a large household data set. Our analysis of iron-rich rice and wheat in India indicates sizeable potential health benefits. The cost-effectiveness of iron biofortification compares favourably with other interventions.
Respondent incentives in contingent valuation : the role of reciprocity
(2011) Frör, Oliver; Ahlheim, Michael; Börger, Tobias
Zur Methodik entscheidungslogisch korrekter Wirtschaftlichkeitsuntersuchungen der öffentlichen Hand
(2023) Mayer, Mark Alexander; Troßmann, Ernst
For the public sector, the principle of economic efficiency must be considered when making investment decisions. It has been shown that public investments affect a variety of objectives. In contrast to private decision makers, the public sector must not solely consider financial objectives. To comply with the principle of economic efficiency as an adequate basis for decision making, economic studies must take into account these diverse objectives of public investments. The published Guidelines, ordinances, and laws on economic analysis do not meet this requirement, nor do economic cost-benefit-analyses. To develop a decision-logical methodology for economic analysis a distinction is made between choice decisions that relate to alternative projects and program decisions that relate to alternative project bundles (programs). The financial objective is interpreted in a special way: it is seen as an opportunistic objective. Rather than an origin benefit, it represents the missing or additional benefit of a displaced or additional investment. This relationship is made explicit in investment program decisions. In choice decisions it must be estimated. A utility analytical approach is used to solve the decision problem on choice decisions. Therefore, nonfinancial objectives are processed directly, while the financial objective is processed by an isolated dynamic investment model. To enable a consistent consideration of temporally differentiated effects, a decision-logically design of a dynamic utility analysis was developed. To consider the financial objective, an investment model was chosen that adequately captures comprehensive effects of investment activity on the financial situation of the public decision making unit: the generalized market interest method according to Troßmann. First, it was made usable for public investments. Then the method was adapted, so it can use different reference points in time. This enables a differentiation of the planning period, which can be used to build appropriate models in the case of long-term investments. Because alternative approaches for integrating the financial and the nonfinancial objectives in one utility analysis are not acceptable, only an omni criterial dynamic utility analysis can be recommended for making public choice decisions. In its basic structure, linear programming models are used for public program decisions. The target function maximizes the utility indicator, which is created using a dynamic utility analysis. The constraints ensure that for all periods investment budgets are complied with. The model was designed to support decisions about the beginning of the project, which on the one hand better corresponds to the practice of medium-term budget planning and on the other hand significantly increases the possibilities in the composition of the optimal investment program even within tight financial budgets. Various implementation conditions require the use of a mixed integer planning model, for which it was shown that an optimal solution can be found after a short computation time even for very extensive models. All in all, this results in two decision-logical modelling proposals for investment decisions in the public sector, which were illustrated by a comprehensive case study. If cleverly combined, they can also be used to deal with the entire investment planning task in the public sector. Combining these well-known methods in business administration into a fundamentally new approach offers starting points for further research. The next step towards results, that are utilizable would be the integration of uncertainty.