Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180918
Authors: 
Meya, Jasper N.
Drupp, Moritz A.
Hanley, Nick
Year of Publication: 
2018
Series/Report no.: 
Economics Working Paper 2017-03
Abstract: 
How the valuation of environmental goods is related to income is a key question for economics, but the role of income inequality is often neglected. We study how income inequality affects the international transfer of the estimated value of environmental goods from a study to a policy site - a practice called value or benefit transfer. Specifically, we apply theory-driven, structural transfer factors to examine whether adjusting for income inequality affects errors made in benefit transfer, drawing on a multi-country valuation study on water quality improvement. Our convergent validity analysis shows that the structural income inequality adjustment reduces benefit transfer errors by more than 1.5 percentage points on average across all transfers. The adjustment for inequality is particularly important when income is distributed more unequally at the policy site relative to the study site, yielding reductions in transfer errors of up to 33 percentage points. Our results highlight the importance of taking the effects of economic inequality into account and are relevant for environmental valuation as well as public policy appraisal.
Subjects: 
environmental valuation
income inequality
benefit transfer
policy appraisal
transfer errors
JEL: 
Q51
H43
D31
D61
D63
Q53
Q25
Document Type: 
Working Paper
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