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Accounting for subsistence needs in non-market valuation: a simple proposal

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  • Victor Champonnois

    (UMR G-EAU - Gestion de l'Eau, Acteurs, Usages - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - BRGM - Bureau de Recherches Géologiques et Minières - IRD - Institut de Recherche pour le Développement - AgroParisTech - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)

  • Olivier Chanel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

Revealed and stated preference techniques are widely used to assess willingness to pay (WTP) for non-market goods as input to public and private decision-making. However, individuals first have to satisfy subsistence needs through market good consumption, which affects their ability to pay. We provide a methodological framework and derive a simple ex post adjustment factor to account for this effect. We quantify its impacts on the WTP for non-market goods and the ranking of projects theoretically, numerically and empirically. This confirms that non-adjusted WTP tends to be plutocratic: the views of the richest – whatever they are – are more likely to impact decision-making, potentially leading to ranking reversal between projects. We also suggest that the subsistence needs-based adjustment factor we propose has a role to play in value transfer procedures. The overall goal is a better representation of the entire population's preferences with regard to non-market goods.

Suggested Citation

  • Victor Champonnois & Olivier Chanel, 2023. "Accounting for subsistence needs in non-market valuation: a simple proposal," Post-Print hal-03620225, HAL.
    • Handle: RePEc:hal:journl:hal-03620225
    DOI: 10.1080/09640568.2021.2008884
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03620225
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    1. Olivier Chanel & Pavitra Paul, 2022. "Do differences in brute luck influence preferences for redistribution in favour of the environment and health?," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-9, December.

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    More about this item

    Keywords

    subsistence needs; adjustment factor; non-market valuation; value transfer; population’s preferences;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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