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How Sensitive Are Environmental Valuations To Economic Downturns?

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  • Loureiro, Maria L.
  • Loomis, John

Abstract

This paper assesses the temporal stability of willingness to pay estimates (WTP) under changing economic conditions. Specifically, two questions are addressed: a) is WTP stable over time? And b) if it is not, are the changes just driven by socio-economic effects, or something else? In order to investigate these questions, we used data from the Contingent Valuation Method (CVM) study conducted after the Prestige oil spill in Spain in 2006, and a second wave of the same survey repeated in 2009, after Spain entered a serious recession. Median WTP estimates dropped from €60.36 in 2006 to €26.92 in 2009 per household, a statistically significant reduction. To investigate the amount of the drop in WTP due to observables versus changes in preferences between 2006 and 2009, we use the 2006 logit WTP coefficient estimates with 2009 levels of the independent variables and we obtain a WTP of €46.37. This estimate is statistically different from the 2009 estimate (€26.92). In the same fashion, by using 2009 logit WTP coefficients with 2006 data, we obtain an estimate of €50.29, also different from the 2006 estimate. Implications of these findings for temporal stability of welfare measures and benefit transfer exercises are also discussed.

Suggested Citation

  • Loureiro, Maria L. & Loomis, John, 2017. "How Sensitive Are Environmental Valuations To Economic Downturns?," Ecological Economics, Elsevier, vol. 140(C), pages 235-240.
    • Handle: RePEc:eee:ecolec:v:140:y:2017:i:c:p:235-240
    DOI: 10.1016/j.ecolecon.2017.05.008
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    2. George Halkos & Panagiotis Stavros Aslanidis & Angelos Plataniotis & Phoebe Koundouri, 2024. "Global insights on Sustainable Development Goal 14: Reviewing willingness-to-pay levels for marine ecosystem protection and conservation," DEOS Working Papers 2416, Athens University of Economics and Business.
    3. Heidi Rapp Nilsen, 2024. "Code Red for Humanity: The Role of Business Ethics as We Transgress Planetary Thresholds," Journal of Business Ethics, Springer, vol. 189(1), pages 1-7, January.
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    5. Perni, Ángel & Barreiro-Hurlé, Jesús & Martínez-Paz, José Miguel, 2020. "When policy implementation failures affect public preferences for environmental goods: Implications for economic analysis in the European water policy," Ecological Economics, Elsevier, vol. 169(C).
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    7. Cicatiello, Lorenzo & Ercolano, Salvatore & Gaeta, Giuseppe Lucio & Pinto, Mauro, 2020. "Willingness to pay for environmental protection and the importance of pollutant industries in the regional economy. Evidence from Italy," Ecological Economics, Elsevier, vol. 177(C).
    8. Wunsch, Andrea & Meyerhoff, Jürgen & Rehdanz, Katrin, 2022. "A test–retest analysis of stated preferences in uncertain times," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 725-736.
    9. Robert J. Johnston & Kevin J. Boyle & Maria L. Loureiro & Ståle Navrud & John Rolfe, 2021. "Guidance to Enhance the Validity and Credibility of Environmental Benefit Transfers," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(3), pages 575-624, July.

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