Risk aversion and willingness to pay for water quality: The case of non-farm rural residents

Abstract

Stated choice experiments are used to investigate the economic valuation of rural residents living in the province of Quebec for water quality improvements. In Quebec, rural residents played an important role in the setting of stricter environmental regulations. Unlike most stated choice experiments about the valuation of improvements in water quality, this study explicitly accounts for risk in the design and analysis of choice experiments. Risk in phosphorus and coliform reductions is introduced through a three-point uniform distribution in the choice sets. The results show greater support for constant absolute risk aversion preferences than for constant relative risk aversion. Rural residents value coliform and phosphorus reductions and the more educated ones are particularly willing to see the government tax farmers and taxpayers to secure such reductions. As the science improves and risk in water quality outcomes decrease and as the political weight of non-farm rural residents increase, it should be easier for governments to replace voluntary cost-share programs by polluter-payer programs.

Stated Preferences for Conservation Policies Under Uncertainty: Insights on the Effect of Individuals’ Risk Attitudes in the Environmental Domain

“…Both certain and uncertain scenarios displayed the same average species target. In a CE exercise, Larue et al (2017), explore preferences for different levels of probable reductions in water quality pollution. They describe expected water quality outcomes using different distributions, with changing mean and with (or without) dispersion-signalling the presence (or absence) of uncertainty.…”

“…In addition, these studies have often found highly heterogeneous responses to risk. In some results individuals were risk averse and tended to be willing to pay less for the scenario with uncertainty (Johansson 1989;Macmillan et al 1996;Isik 2006;Larue et al 2017), in others they were risk neutral and displayed no significantly different preferences for certain or uncertain scenarios (Koundouri et al 2014). One of the reasons for these heterogeneous results may be that the effect of risk on social preferences can differ depending on a variety of factors that were not generally controlled for.…”

“…Very few SP studies (e.g., Johansson 1989;Macmillan et al 1996;Isik 2006;Koundouri et al 2014;Larue et al 2017) have managed to isolate the effect of uncertainty as described above and to explore its influence on individuals' willingness to pay (WTP). However, as we will describe in Sect.…”

The Farmer’s Willingness to Preserve Rice Farming in Suburban Areas in Sleman Regency Yogyakarta, Indonesia

“…Halkos & Matsiori (2016) examine(examined) the willingness to pay WTP to protect artificial lakes. Larue et al (2017) examined the economic assessment of rural residents living in the province of Quebec to improve water quality. Boyer et al (2016) examined the willingness to pay additional costs for reclaimed or recycled water.…”

“…This result is different from the findings of Bravo-Vargas et al (2019) which stated that education, although brief, would increase awareness of controlling natural resources and the environment. Even Larue et al (2017) stated that highly educated residents were very willing to pay for pollution control. In line with the findings above, Gupta, M (2016) has found that education, income, and age played an important role in asking the community for environmental sustainability.…”