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PREM Working Paper 07-07 - Testing Reliability and Construct Validity of In-kind WTP Responses in Contingent Valuation

Author(s)Sonia Akter, Roy Brouwer, Saria Chowdhury, Salina Aziz
Co-Author(s)
Date2007-12-15
Theme(s)Water, Policy and Trade, Climate
Method(s)Regression Analysis, Policy Instruments, Economic Modelling
Serie(s)Working Papers

Summary


The aims of the study presented in this paper are to test the reliability and construct validity of inkind willingness to pay (WTP) responses obtained through a contingent valuation survey from a case study in Bangladesh. In a wide scale household survey in the north eastern wetland basin of Bangladesh, agricultural farmers, who refused to pay a risk premium in cash to buy a hypothetical flood insurance scheme due to income constraints, were asked to pay a premium in-kind. 23 per cent of the total sample agreed to buy flood insurance by paying the risk premium in the form of a proportion of their seasonal crop. Farmers’ stated WTP varies from two kg of rice crops per year per household to 150 kg with an average WTP 37 kg of rice crops per year which is 0.11 per cent the average yearly household crop production. Results of the estimated regression model demonstrate both reliability and construct validity of in-kind WTP responses. The study concludes that incorporating in-kind WTP in CV studies in semi-subsistence economies can yield reliable and valid estimates.

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