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Handbook on Contingent Valuation

Edited by Anna Alberini and James R. Kahn

The Handbook on Contingent Valuation is unique in that it focuses on contingent valuation as a method for evaluating environmental change. It examines econometric issues, conceptual underpinnings, implementation issues as well as alternatives to contingent valuation. Anna Alberini and James Kahn have compiled a comprehensive and original reference volume containing invaluable case studies that demonstrate the implementation of contingent valuation in a wide variety of applications. Chapters include those on the history of contingent valuation, a practical guide to its implementation, the use of experimental approaches, an ecological economics perspective on contingent valuation and approaches for developing nations.
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Chapter 4: The Use of Contingent Valuation in Benefit–Cost Analysis

John C. Whitehead and Glenn C. Blomquist


4 The use of contingent valuation in benefit–cost analysis John C. Whitehead and Glenn C. Blomquist 4.1 Introduction Benefit–cost analysis is policy analysis that identifies whether a government project or policy is efficient by estimating and examining the present value of the net benefits (PVNB) of the policy, PVNB ϭ ͚ (1t ϩ r)tt, tϭ0 T B ϪC where Bt are the social benefits of the policy in time t, Ct are the social costs of the policy in time t, r is the discount rate and T is the number of time periods that define the life of the policy. If the present value of net benefits is positive, then the program yields more gains than losses and the program is more efficient than the status quo. The contingent valuation method (CVM) is a stated preference approach for measuring the benefits, or, in the case of benefits lost, the costs of the policy. The purpose of this chapter is to provide an overview of the role the contingent valuation method plays in benefit–cost analysis. We begin with a brief discussion about the role of benefit–cost analysis in policy making, the steps of a benefit–cost analysis, and how contingent valuation fits into this framework (see Boardman et al., 2001 and Johansson, 1993 for introductory and advanced treatments). Next, we discuss a range of issues for which the contingent valuation method is an...

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