Labor as a Utility Measure in Contingent Valuation: Application to the Valuation of Restoration Projects in Latin America

Peer Reviewed
1 January 2013

Monetary contributions might not be an appropriate welfare measure in Contingent Valuation (CV) when household incomes are very low. In such cases, willingness to pay (WTP) is restricted by household's ability to reduce the consumption of other goods in order to pay for the environmental good under valuation. Beneficiaries, however, may be willing to contribute their time to work on the project instead of paying money. In this context, we assess the benefits of ecosystem services restoration in a rural area of high conservation value in central Chile, using a CV study that includes two WTP questions; one for cash and another for labor payments. The results indicate that labor payments in the form of a number of working hours per week were highly accepted among people. In fact, in our sample more people were willing to pay in terms of labor time than through traditional cash payments. When we analyze the economic efficiency of the restoration project considering only cash payments, the Net Present Value (NPV) is negative (-US$ 255,834), but when considering the value of time payments the NPV is US$629,980. Overall results support that this approach ought to be seriously considered when designing contingent valuation in similar social and economic contexts.

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Publication | 28 December 2013