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PREM Working Paper 06-02 - Economic valuation of flood risk exposure and flood control in a severely flood prone developing country
|Author(s)||Roy Brouwer, Sonia Aftab, Luke Brander, Enamul Haque|
|Method(s)||Valuation and CBA|
This paper presents the results of a dichotomous choice contingent valuation (CV) study of flood control policy in Bangladesh. The application of CV studies in the domain of flood exposure and flood control, where people are asked to trade-off money income in terms of willingness to pay (WTP), the risk of flooding and corresponding impacts on their life and livelihood, is rare. The use of CV in developing countries furthermore faces the challenge of significant income constraints, limiting the applicability of the method. Average WTP in this study is 0.5 percent of annual household income. As expected, stated WTP varies significantly with different levels of exogenous flood risk exposure, proxied by the distance people live from the river and the level of inundation during the rainy season. WTP is furthermore significantly constrained by household income and the disutility from flood risks measured through higher or lower flood damage costs and risk aversion measured through people’s attitude to flood protection. We find a number of problems with the CV application in this specific cross-cultural context, which are addressed in more detail in a follow-up survey. A test-retest carried out six months after the original survey shows that the stated WTP values are stable in eighty percent of the cases.
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