By Robert A. Young
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Additional resources for Measuring Economic Benefits for Water Investments and Policies (World Bank Technical Paper)
Sample text
These can be divided into either "revealed preference" or "stated preference" approaches, both of which are based on surveys of actual or potential consumers. Of course, all the issues of sample survey planningsample specification, questionnaire design, choice of survey techniquemust be recognized and overcome. Relying on observations of actual expenditure choices made by consumers (revealing their preferences) the revealed preference methods infer net willingness to pay from the differences in expenditures observed with varying levels of environmental amenities or water supply.
The principal advantage of the technique is that it can potentially measure the economic benefits (or damages) of a wide assortment of beneficial (or adverse) effects in a way that is consistent with economic theory. A major plus is the Page xiii possibility of evaluating proposed, in addition to already available, goods or services. However, although a contingent value study can be an effective measurement tool where no other technique applies, some critics doubt the reliability of willingness to pay statements in situations where the respondent has no actual money at stake or is unfamiliar with the potential service being valued.
Pecuniary impacts (often referred to as secondary economic impacts in the water planning literature) are those reflected in changes in incomes or prices, (such as effected by increased purchases of goods and services in a regional economy). Secondary economic impacts typically represent income distribution impacts. Page 6 From the larger perspective of nation or state, secondary impacts registered on a specific locality are likely to offset by similar, but more difficult to isolate, effects on income of opposite sign elsewhere.