Browsing by Subject "Public expenditure"

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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.
Respondent incentives in contingent valuation
the role of reciprocity
(2011) Frör, Oliver; Ahlheim, Michael; Börger, Tobias