Cost–Benefit Analysis and Distributional Preferences
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Cost–Benefit Analysis and Distributional Preferences

A Choice Modelling Approach

Helen Scarborough and Jeff Bennett

Advancing the incorporation of equity preferences in policy analysis, this book demonstrates the application of choice modelling to the estimation of distributional weights suitable for inclusion in a cost–benefit analytical framework. A platform for discussion of the challenges and opportunities of this approach is presented in the form of a detailed case study designed to estimate community preferences for different intergenerational distributions. While the case study is focused on natural resource management and environmental policy, the conceptual and methodological advances illustrated by the authors are relevant and applicable to a wider array of policy deliberations.
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Chapter 4: Case Study: Design of Intergenerational Distribution Choice Experiment

Helen Scarborough and Jeff Bennett


4.0 INTRODUCTION Having proposed the stated preference method of choice modelling as a means of estimating the distributional preferences of the community, this chapter outlines a case study which illustrates this innovative application of choice modelling. The case study addresses the specific distributional question of intergenerational equity. The distributional preferences of the current generation with respect to future generations are an integral aspect of environmental policy decision-making. For example, the Stern Review on the Economics of Climate Change (Stern 2007, p. 23) suggests that: Questions of intra-and inter-generational equity are central. Climate change will have serious impacts within the lifetime of most of those alive today. Future generations will be even more strongly affected, yet they lack representation in present-day decisions. The question of intergenerational distribution involves decisions about the balance between consumption by the current generation and consumption in the future. The resources available for future production and consumption are inherently dependent on the capital/consumption balance of the current generation. The aims of this case study are twofold: first, to show that choice modelling provides a potential means for estimating social welfare preferences and, second, to estimate a set of intergenerational distributional weights suitable for inclusion in a cost–benefit setting for environmental policy decision-making. The first section of this chapter provides a review of the current literature with respect to the particular allocative question of intergenerational distribution. This literature briefly elaborates on theories of social justice within the context of justice between generations. As will be discussed, the...

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