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The sensitivity of willingness to pay to an economic downturn

Metcalfe, Paul J. and Baker, William (2012) The sensitivity of willingness to pay to an economic downturn. In: Envecon 2012: Applied Environmental Economics Conference , 9 March 2012, Royal Society, London, UK.

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Abstract

Stated preference (SP) studies are typically undertaken at one point in time, while the results may be relied on in decision-making several months or even years later. This reliance is only justified if values are stable over time, an assumption which is doubtable given the onset of an economic downturn. We assess the reliability of values taken before an economic downturn for application during the downturn, via analysis of responses to two near identical surveys conducted respectively before and during the 2008-2010 economic recession. The surveys were valuing near identical sets of permanent water sector service and environmental improvements. Each survey employed a dichotomous choice and a payment card contingent valuation question. Our main result is that the economic downturn led to lower payment card responses but had no effect on the values elicited via a dichotomous choice (ie referendum-type) contingent valuation question. We explore potential explanations for this finding in light of the literature on closed-ended versus open-ended elicitation method comparisons.

Item Type: Conference or Workshop Item (Paper)
Official URL: http://www.eftec.co.uk/2012/envecon-2012
Additional Information: © 2012 The Authors
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
Journal of Economic Literature Classification System: D - Microeconomics > D6 - Welfare Economics > D60 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q25 - Water
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects
Sets: Departments > Geography and Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 03 May 2012 10:51
URL: http://eprints.lse.ac.uk/43316/

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