Avoiding water restrictions in Australia: using a finite mixture scaled ordered probit model to investigate the impact of changes in the climatic setting
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(Published version)
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2014
Authors
Cooper, B.
Burton, M.
Crase, L.
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Conference paper
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Programme of the 5th world congress of environmental and resource economists, 2014, pp.1-35
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5th World Congress of Environmental and Resource Economists (28 Jun 2014 - 2 Jul 2014 : Istanbul, Turkey)
Abstract
Mandatory water use restrictions have become a common feature of the urban water management landscape in countries like Australia. Water restrictions limit how water can be used and have been presumed to impose welfare losses on households. To enumerate the extent of those losses practitioners and researchers have increasingly relied on stated preference techniques like contingent valuation. Most interest in these studies emerged in times of drought, when the severity of restrictions and their deployment had increased. A question thus arises as to whether the same estimates can be legitimately deployed to water supply projects undertaken when water is more plentiful. This study sheds light on the impact on contingent valuation estimates of willingness to pay when the climatic backdrop to the experiment is altered. We report the results of a comparison between two surveys, undertaken in 2008 and 2012, using a common multiple‐bounded discrete choice contingent valuation design, administered across six cities in Australia. Using a finite mixture, scaled ordered probit model we investigate changes over time in willingness to pay by city, and also causes of individual heterogeneity in willingness to pay. We find that willingness to pay estimates are materially impacted by changes to the wider context of the experiment but the direction of change is not consistent.
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Copyright 2014 The Authors