CHAPTER-V EMPIRICAL ANALYSIS OF SOLID WASTE...
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CHAPTER-V
EMPIRICAL ANALYSIS OF SOLID WASTE MANAGEMENT BY
USING CONTINGENT VALUATION METHOD
The Contingent Valuation (CV) method is a widely used non-market valuation
method especially in the areas of environmental cost–benefit analysis and
environmental impact assessment (see Mitchell and Carson, 1989; Cummings et al.,
1986). Its application in environmental economics includes estimation of non-use
values (e.g. Walsh et al., 1984; Brookshire et al., 1983), non-market use values (e.g.
Choe et al., 1996; Loomis and duVair, 1993) or both (e.g. Niklitschek and Leon, 1996;
Desvousges et al., 1993) of environmental resources. In recent years, this method is
commonly used in developing countries to elicit the individuals’ preferences for the
basic infrastructural projects such as water supply and sanitation (see Whittington,
1998; Merrett, 2002). Though a popular non-market valuation method, a group of
academicians criticise this method severely for not being a proper method of estimating
the non-market values (see Hausman, 1993). Hence, the major objective of the concept
which is being used to portray the Willingness to Pay to improve the River water
quality in the study area based on empirical aspects of CV method.
The CV method was originally proposed by Ciriacy-Wantrup (1947) who was
of the opinion that the prevention of soil erosion generates some ‘extra market benefits’
that are public goods in nature, and therefore, one possible way of estimating these
benefits is to elicit the individuals’ willingness to pay for these benefits through a
survey method (see Portney, 1994; Hanemann, 1994). However, Davis (1963) was the
first to use the CV method empirically when he estimated the benefits of goose hunting
through a survey among the goose-hunters. This method gained popularity after the two
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major non-use values, namely, option and existence values have been recognised as
important components of the total economic values in environmental economics
literature, especially during the 1960s. While the conventional revealed preference
methods such as travel cost method are not capable of capturing these non-use values
(Smith, 1993), the only method that is identified for estimating these values is the
contingent valuation method (CVM) (see, Desvousges et al., 1993). Hence, a
considerable amount of studies on CVM - both theoretical and empirical in nature -
have emerged in the economic valuation literature, including a large number of studies
criticising the CV method.
Summaries of CV studies by different authors reveal that the major criticism of
results of CVM revolves mainly around two aspects, namely, (a) validity and (b)
reliability (Smith, 1993; Freeman, 1993; NOAA, 1993). In simple terms, validity refers
to the ‘accuracy’ and reliability refers to ‘consistency’ or ‘reproducibility’ of the CV
results (Kealy et al., 1990). In other words, validity refers to the degree to which the
CV method measures the theoretical construct of interest which is the true economic
value of individuals (Freeman, 1993). The validity is of three types, namely, content
validity, criterion validity and construct validity (Mitchell and Carson, 1989; Bateman
et al., 2002). The content validity in a CV experiment simply refers to the ability of the
instruments included in the scenario to measure the value in an appropriate manner.
Criterion validity of the CV method may be assessed in terms of another measure, say a
‘market price’ for the same commodity which may be considered as a criterion.
Construct validity has two forms: convergent validity and theoretical validity. The
convergent validity refers to the correspondence between two measures of the same
theoretical construct. CV results can be said to be ‘theoretically valid’ if the results
conform to the underlying principles of economic theory. In other words, the
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theoretical validity involves assessing the willingness to pay (WTP) values of the CV
method by way of regressing the WTP value against standard economic variables
(Mitchell and Carson, 1989). On the other hand, the reliability refers to the extent to
which the variance of the WTP amounts is due to random sources (Mitchell and
Carson, 1989). According to Loomis (1990), ‘Reliability requires that, in repeated
measurements, (a) if the true value of the phenomenon has not changed a reliable
method should result in the same measurement (given the method’s accuracy) and (b) if
the true value has changed a reliable method’s measurement of it should change
accordingly’. The following section is devoted to discuss various errors/biases affecting
the validity and reliability of the CV method along with illustrations from empirical
studies that looked into addressing these two issues.
Hicks (1946) classified the ‘consumer surplus measure’ into two different
categories, namely, the compensating variation and the equivalent variation. For a
‘proposed welfare gain’ due to provision of public good, the compensating variation
refers to the amount of money income that has to be given up by the consumer to attain
increased level of utility (i.e. WTP measure). The equivalent variation refers to the
amount of compensation required to be provided to the individual so that he could
attain an improved utility level in case the provision of the public good does not take
place (i.e. WTA). For a welfare loss, the compensating variation refers to the amount of
money income that is required to compensate the individual for the welfare loss
experienced (i.e. WTA) and equivalent variation refers to the amount of money income
to be sacrificed by the consumer to prevent the loss from occurring in future
(i.e. WTP) (Bateman and Turner, 1993).
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In rigorous economic terms, the contingent valuation method estimates the
Hicksian consumer surplus—either the compensating variation or the equivalent
variation—due to change in the provision of public goods (Bateman and Turner, 1993).
One of the important conclusions derived from the above paragraph is that, in principle,
either WTP measure or WTA measure could be used interchangeably to elicit
individuals’ preferences for change in the level of environmental goods and services.
Yet, one of the issues that is supposed to affect the validity of the CV results is the
disparity that arises between the WTP value and WTA value for the same good under
consideration (Mitchell and Carson, 1989). It has been demonstrated both theoretically
as well as empirically that the WTA value is always greater than the WTP value if used
for the same issue (Shogren et al., 1994; Hanemann, 1991; Brookshire and Coursey,
1987; Coursey et al., 1987; Knestch and Sinden, 1984; Bishop and Heberlein, 1979;
Willig, 1976). This being the case, the question that has to be addressed is: which
measure (i.e. either WTP or WTA) should be used in a CV survey to elicit the value of
the changes in the provision of public goods? (Mitchell and Carson, 1989). Before
going on to answer this question, let us see the reasons why the disparity between WTP
and WTA measures arises.
The WTP/WTA disparity has been attributed to many different factors. Willig
(1976), having theoretically demonstrated the disparity between WTP and WTA
measures for a priced commodity, concluded that the WTP/WTA disparity could be
attributed to the ‘income effect’. In a strict sense, the income effect in economics refers
to the effect of additional income on the quantity purchased of a particular commodity
(Diamond et al., 1993). The underlying implication of the income effect is that the
WTP for a good is constringed by income, whereas the WTA compensation is not. In
this sense, Willig’s (1976) conclusion may be interpreted as to imply that WTP and
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WTA would diverge for a commodity which has high income elasticity of demand,
while accompanied by income constraint. Randall and Stoll (1980), extending Willig’s
(1976) analysis from the ‘price space’ to ‘commodity space’, proved that the WTP and
WTA measures are found to be closer for public goods unless they are affected by an
unusual income effect (Hanemann, 1991). In explaining the disparity further,
Hanemann (1991) showed that: (a) for a change in the quantity (unlike change in the
price), there is no such presumption that WTP and WTA measures should be close; and
(b) not only the income effect but also the ‘substitution effect’ explains the larger
disparity between WTP and WTA. It means that the divergence between WTP and
WTA values could range from zero to infinity depending on the degree of substitution
between goods, accompanied by positive income elasticity (Shogren et al., 1994). Some
of the empirical studies have attempted to understand the influence of substitutes on the
WTA/WTP disparity. For example, using two private goods (a candy bar and a coffee
mug) that are close substitutes and a public good (reduction of human health risk),
which has no close substitute, Shogren et al. (1994) demonstrated that the divergence
between WTP and WTA values for the two private goods disappears after repeated
trials, while the divergence is robust and persistent for the public good. The results of
this study not only proved the role played by the substitution effect in explaining the
disparity between WTP and WTA but also showed how the respondents’ ‘familiarity’
with the valuation experiment plays a role in reducing the disparity. In another
empirical attempt, Adamowicz et al. (1993) used two goods—one without substitute
(a feature film in a local theatre) and the other with substitute (hockey match with a
substitute of live radio/TV telecast). Their experiment demonstrated that substitution
factor does explain the disparity between WTP and WTA estimates. However, the
authors argue that even though the substitution factor reduces the disparity it does not
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eliminate the disparity entirely. This implies that there are other factors that could
provide possible answers to the WTA/WTP disparity. Apart from income and
substitution effects, some of the theoretical developments in economics and psychology
are also extended to explain the WTA/WTP disparity. For example, the ‘prospect
theory’ developed by Kahneman and Tversky (1979) also explains the variation in the
WTP and WTA measures. According to Kahneman and Tversky (1979), the loss of a
commodity for an individual is considered to be greater than the gain derived from
buying the same commodity. This is because, increase in income is weighted by a
relatively small utility compared to decrease in income which is weighted by much
larger utility (Coursey et al., 1987). More precisely, for the ‘loss averse individuals’ the
disparity would be greater (see Brookshire and Coursey, 1987). Thaler (1980)
demonstrated WTA/WTP disparity through ‘endowment effect’ and noted that it might
be related to prospect theory, which is about decision making under uncertainty.
The existence of loss aversion by individuals has been proved by Brookshire
and Coursey (1987) who found in a hypothetical experiment that the respondents’
WTA value for a particular level of reduction in an area with tree cover was 75 times
greater than the WTP value for the same level of expansion in the same area. The
concept of ‘property rights’ as well as ‘transaction cost’ after Coase (1960) also holds
the reason for the disparity between WTP and WTA. For instance, the WTA/WTP
disparity has been attributed to the rejection of the underlying property rights by
individuals (Mitchell and Carson, 1989). According to Mitchell and Carson (1989), in
many cases the individuals consider the WTA property right as illegitimate or
implausible or both. This is evident from generation of large number of ‘protest bids’ in
CV studies that used WTA measure as elicitation format. Apart from property rights,
the transaction costs involved in the process of obtaining goods and services may also
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result in WTP/ WTA disparity (Brown and Gregory, 1999). During market transaction,
the consumer calculates the total cost of buying and selling the good that includes not
only the price of the good but also the transaction cost. This is being the case, while
buying the good the individual’s willingness to pay would exclude the transaction cost
and while selling the same good the willingness to accept compensation would include
it. However, since market for public goods are either nil or very weak, the transaction
cost theory may not be expected to play a major role in the WTP/WTA disparity issue.
Apart from theoretical aspects, the value elicitation or experimental aspects of CV
method are also found to affect the WTA/WTP disparity. Cummings et al. (1986) bring
the ‘familiarity’ issue (see also, Shogren et al., 1994) for addressing not only the
disparity between WTP and WTA values but also many other biases in CV method.
How the respondents’ familiarity with the valuation experiment (as well as the good)
and their optimization strategy in a CV study leads to provide answer to some of the
serious problems in CVM have been empirically tested by many authors, especially in
laboratory experiments (e.g. Coursey et al., 1987). These experiments show that
repeated trials (that provide adequate time for the respondents to understand the issue
and optimise) lead to convergence between WTP and WTA measures. In many cases,
it was observed that WTA measure comes down gradually over repeated trials, whereas
the WTP measure remains stable for number of trials (Coursey et al., 1987). These
findings provide support for Hoen and Randall’s (1987) argument that the disparity
between WTP and WTA would be greater for those individuals who lack time to
optimise their decision.
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In general, studies on WTA/WTP disparity conclude that a larger difference
between WTA and WTP can be attributed to the ‘weak’ experimental features of the
CV studies. These features include hypothetical payments; students being used as
objects, using less incentive compatible elicitation questions, etc. (see Horowitz and
McConnell, 2002). The implication is that if the survey is designed ‘as realistic as
possible’ then the WTA/WTP ratio would become smaller. However, results of a meta-
analysis by Horowitz and McConnell (2002) provide different kinds of insights into the
debate. Horowitz and McConnell’s (2002) meta-analysis tested whether the high
WTA/WTP ratios are an experimental artefact, or they truly present a broad-based
picture of preferences. Forty-five studies on WTA/WTP have been taken for the meta-
analysis and these studies dealt with goods such as chocolates, pens, mugs, movie
tickets, hunting licenses, visibility, nuclear waste repositories, nasty-tasting liquids, etc.
Using a random effects regression model, the study regressed the WTA/WTP ratio
against type of good (ordinary vs. otherwise), survey design (hypothetical or real
payment; elicitation technique; and student and non-student), mean WTP and year.
The results of this study are striking. For example, the WTA/WTP ratios in real
experiments do not differ significantly from that of hypothetical experiments. This
finding is contradictory to the conventional notion that the experiments involving real
payment are superior to experiments involving hypothetical payments. Another
important finding of this study is that WTA/WTP ratio is higher for incentive
compatible elicitation techniques, whereas the earlier studies found that incentive
compatible elicitation techniques provide low WTA/WTP ratio. Another finding which
goes against the earlier findings is that the WTA/ WTP ratio is significantly lower for
students than the general public. This implies that moving the laboratory experiment to
the real world situation will not reduce the ratio. Also, respondents’ familiarity with the
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experiments does not provide lower ratios. All these important findings of Horowitz
and McConnell (2002) suggest that the high observed WTA/WTP ratios do not appear
to be experimental artifacts and indeed, the answer for this disparity comes from the
broad-based preferences of the individuals.
From the above discussion, it is clear that there exists a disparity between WTP
and WTA and this disparity is influenced by many different factors such as income
effect, substitution effect, transaction costs, broad based preferences, etc. Moreover,
the disparity has been an accepted phenomenon in the CVM literature as demonstrated
by both theoretical as well as empirical studies. However, having agreed that there
exists a difference between WTP and WTA, one important question that one needs to
answer is: how much can it differ? According to Hanemann (1991), the WTA value
can be five times greater than the WTP value. But some of the empirical studies show
that the disparity between WTP and WTA for a same commodity ranges from a low of
2.4 times to a maximum of 61 times (e.g. Brookshire and Coursey, 1987). Occurrence
of large-scale disparity between the WTP and WTA in empirical studies leads to the
following conclusions: (i) one or both of the CV measures are wrong or the theory is
wrong (Carson et al., 2001); and (ii) the WTA measure is not a proper measure of
consumer surplus (see Adamowicz et al., 1993), and therefore, WTP measure rather
than the WTA measure is the proper measure of value that should be used in the CV
studies (Cummings et al., 1986; NOAA, 1993).
One of the major sources of error in the CV method is ‘embedding’ that is
frequently reported in many CV studies (Bateman et al., 1997). Embedding refers to a
phenomenon in which a wide range of variation is found to occur in WTP value for the
same good depending on whether the good is valued on its own or valued as a part of a
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more inclusive package (Kahneman and Knestch, 1992). The embedding is also called
part–whole bias, dis-aggregation bias, sub-additivity effect, scope effect (see
Cummings et al., 1986; Mitchell and Carson, 1989; Hanemann, 1994; Bateman et al.,
1997) even though the meaning between these concepts differs (Boyle et al., 1994).
The embedding effect is defined in different ways by different authors. According to
Kahneman and Knestch (1992), the embedding occurs if ‘the same good is assigned a
lower value if WTP for it is inferred from WTP for a more inclusive good rather than if
the particular good is evaluated on its own’ (Kahneman and Knestch, 1992, p. 58).
According to Harrison (1992), embedding occurs when the WTP value for one good
differs ‘insignificantly’ with the WTP value for a more inclusive good. The existence
of the embedding effect is supposed to result in a situation where ‘different surveys can
obtain wide variable stated willingness-to-pay amounts for the same public good, with
no straightforward way for selecting one particular method as the appropriate one’
(Diamond and Hausman, 1994, p. 46). Embedding affects the validity of the CV
results, and therefore, it is recommended that every CV study should have an inbuilt
mechanism called, ‘internal consistency test’ to assess the validity of results (NOAA,
1993). One way of assessing the internal consistency of the results is to involve the
results for ‘scope test’. To understand the nature of embedding effect and how the
scope test is used for assessing the validity of the results, let us discuss briefly about
some of the studies that have looked into these issues. Earlier CV studies have widely
reported occurrence of embedding in their results. For example, results of a CV study
by Kahneman (1986) on conservation of fish in lakes showed that WTP value for
cleaning up all the lakes in Ontario (larger area) was only slightly higher than the WTP
value for cleaning up lakes in one region (smaller area). Later in a famous study,
Kahneman and Knestch (1992) used three goods, namely, ‘improved rescue equipment
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personnel’ (say, Good A), which is embedded in ‘improved preparedness for disasters’
(say, Good B), which in turn is embedded in ‘environmental services’ (say, Good C).
These three goods were assigned to three independent sample groups in such a way that
sample group 1 received Good A, sample group 2 received Good B and sample group 3
received Good C. It was observed that the mean WTP values provided by three
sample groups for all the three goods separately were as follows: $135.91 for Good C;
$151.60 for Good B and $122.64 for Good A. The difference between the mean values
was found to be statistically insignificant, implying that the embedding effect has
occurred in the results.
Hence, Kahneman and Knestch (1992) conclude that the values elicited through
CV are not true values but arising out of individuals’ ‘purchase of moral satisfaction’.
However, Smith (1992) claims that none of the conclusions of Kahneman and
Knestch’s (1992) study (KK study hereafter), which suggest that the embedding effect
is a problem in CV results, are correct. To substantiate his claim, Smith (1992)
provides three reasons: (i) the question asked in KK study to test the embedding effect
was not conveyed in such a way that the respondents could properly understand the
intention of the researchers. More precisely, the reference and target levels of the
provision of the inclusive good were not properly conveyed to the respondents; (b) the
general implementation of the survey was found to have been improperly done. For
instance, issues such as how the questionnaire was developed, whether it was pre-
tested, how sample households have been selected, statistical tools used, etc., have not
been properly addressed in the study; and (c) the interpretation of the results in line
with economic theory was also found to be flawed. Therefore, Smith’s (1992)
arguments imply that the results of the KK study should not be used to assess the
ability of the CV method to measure the non-market values. Moving one step forward,
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Harrison (1992) not only criticises the way in which the goods were described in KK’s
study but also tries to explain the reason for the embedding effect with the help of
‘Good Cause Dump Hypothesis’ which refers to a situation where the respondents have
a WTP value for a basket of good causes and dump the whole value for any good in the
basket when asked for valuing a single good. Moreover, re-analysing KK’s data with an
alternative method, Harrison (1992) concludes that the KK study had employed
inappropriate statistical and data handling procedures. However, Harrison’s (1992)
claim has been challenged by Nickerson (1993). Nickerson (1993) evaluates KK’s
version of hypothesis, data and statistical analysis and Harrison’s version of KK’s
hypothesis, data and statistical analysis independently and concludes that it is
Harrison’s statistical and data-handling procedures that are inappropriate. Some of the
CV studies conducted subsequently did also report the occurrence of ‘embedding’ in
their results. For example, Desvousges et al. (1993) attempted to test the theoretical
validity which involves evaluations of how well contingent valuation estimates
conform to hypotheses derived from a theoretical construct, using the migratory bird
experiment. Three independent samples at two Malls in Atlanta, Georgia, were
assigned to three different scenarios that differ only in terms of number of bird death
prevented from oil spills. That is, three versions of the survey (2000, 20,000 or
200,000) and their respective percentage (i.e. much less than 1%, less than 1% and
above 2%) of the water fowl deaths prevented through protection of 250,000 ponds in
the Central Flyway were presented to the respondents. The WTP values (of the open-
ended results) for all the three treatments showed that there was no significant
difference between the WTP values for these treatments indicating the presence of
embedding effect. In addition to migratory water fowl scenarios, the authors also used
oil spill scenarios (i.e. small spills vs. all spills) to see whether the theoretical validity
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of CVM for one commodity (i.e. migratory water fowl) is replicable for another
commodity (i.e. oil spills).
In the oil spill case too, the annual mean willingness to pay values for different
levels of oil spill - derived from both open-ended as well as dichotomous choice
techniques - do not differ significantly. From these results, it has been concluded that
the WTP values are infected with embedding effect, and therefore, the results of the
CVM study are not theoretically valid (Desvousges et al., 1993). Boyle et al. (1994),
using the results of migratory water fowl experiment of Desvousges et al. (1993),
derive the following possible conclusions: (a) the marginal utility for preventing bird
deaths (additional) is zero; (b) the marginal utility is greater than zero but is too small
to detect; (c) the marginal utility is positive but not trivial, but CV is not able to
measure the differences; (d) respondents’ perception about the percentage of the birds
prevented must have been subjective; and (e) the respondents WTP value must have
been based on the number of ponds (over 250,000) to be covered which was same in all
three treatment rather than number of bird death prevented (Boyle et al., 1994).
Having observed ‘embedding’ in CV studies that focused on measuring the non-
use values, Mitchell and Carson (1989) conclude that embedding may be a problem
only in the case of non-use values. However, Kahneman and Knestch (1992) argue that
embedding is not restricted to non-use values alone but it also occurs in the case of
estimation of use values for public goods. It should be noted that embedding has been
found to occur in CV studies on private goods. For example, Randall and Hoehn (1996)
used two private goods - (i) a range of food items and (ii) rice [which is embedded in
(i)] and demonstrated that the ‘embedding effects observed with the contingent
valuation of non-market goods are observed here with market demands for private
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goods’ (p. 370). In another study, Bateman et al. (1997) used a similar kind of
methodology on WTP for ‘full meals’ and WTP for ‘part’ of it and found the existence
of embedding effect in their results. The conclusion of these two private good studies
is that embedding is an ordinary economic phenomenon that not only occurs in public
goods but also in private market goods. However, some of the studies found opposite
results in which the embedding effect has been reported to be nil. For example, Choe
et al. (1996) in their water quality study found that embedding effect did not occur for
two different water quality levels that differed in scope. It should be noted that
different individual studies have come out with different kinds of results. But, what
these studies have to say collectively? Smith and Osborne (1996) conducted a meta-
analysis to assess the internal consistency of the CV results - especially the theoretical
properties of the underlying preferences for the visibility improvements. This study
utilises meta-analysis of five different CV studies that focused on changes in visibility
at the US national parks. These five case studies were selected in such a way that they
cover both use and non-use values and include both on-site surveys and surveys
conducted in far away distance. Using Box_Cox and Feasible Generalised Least Square
(FGLS), the mean WTP (MWTP) has been regressed against the independent variables
such as, eastern vs western parks; decline or improvement in visibility; and the extent
of the change (Single Park or the whole area). Other variables such as type of
elicitation format used, whether interview took place within the park (or far away
distance) and whether the households live in the park itself were also included in the
analysis. Controlling for the sensitivity of the independent variables, the meta-analysis
found that there exists a statistically significant, positive relationship between WTP and
proportionate change in the visible range. Apart from the statistical significance
between the WTP and the visible range, the analysis also investigated the proportionate
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change in the WTP value to the visible range and found existence of economic
plausibility in the results. Overall, the meta-analysis reveals that the ‘visibility changes
do seem to be responsive to the NOAA panel’s call for both statistical significance and
economic plausibility in the scope test’ (p. 299). Though meta-analyses and individual
studies provide theoretically consistent results, occurrence of scope effect (or
embedding) in many other individual CV studies still causes disturbance. Having
observed scope effect in CV studies, Diamond and Hausman (1994) provide two kinds
of interpretation regarding this phenomenon. The first interpretation is that the CV
studies valuing two commodities rather than one are unreliable. The other
interpretation, as argued by Kahneman and Knestch (1992), is that the ‘warm glow’
might have occurred in the CV results. It is, therefore, argued that the presence of
scope effect in the WTP/ WTA accept a value, which implies that the contingent
valuation method may not be useful for estimating the non-use values (Kahneman and
Knestch, 1992; Diamond and Hausman, 1994). This is because the occurrence of
embedding effect violates the fundamental principle by which a rational consumer is
directed to prefer more of a good or service to less and pay more for larger quantity
compared to lesser quantity (Desvousges et al., 1993). The proponents of the CV study
do not agree with the argument by the opponents that CV method is not theoretically
valid due to occurrence of embedding or scope effect. One of the reasons why the
embedding shows up in some of the CV studies, according to Hanemann (1994), is due
to simple economic theory. The marginal utility theory provides an answer to this
phenomenon in the sense that individuals’ utility at margin declines for the subsequent
bundle of commodity they consume. However, empirical evidence not only shows the
difference in WTP for two different quantity levels is more or less equal but sometimes
the decline in the value for the larger quantity is zero (NOAA, 1993), which is
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disturbing. But some of the authors argue that this is because of the way in which the
commodity is being described in the CV studies (see Smith, 1992; Hanemann, 1994;
Carson et al., 2001).
For instance, scenario description that does not facilitate the respondents to
make any real difference between different levels of goods described, convenience
sampling used in surveys (i.e. stopping the respondents at shopping malls and asking
WTP questions in the case of Desvousges et al. (1993) study) and self-administered
questionnaires that are prone to unreliable results, etc., are considered to affect the
validity of the CV results (Hanemann, 1994). Do the elicitation techniques used in the
description of the CV scenario reduce the scope effect and improve the validity of the
CV results? A comprehensive study by Hammitt and Graham (1999) used two different
approaches to understand the influence of preference elicitation on the WTP values for
reduction of health risk. The first approach involves meta-analysis of 25 CV studies on
health-related aspects, such as road safety, medical treatment, hazardous waste
management, etc. These studies were selected on the basis of three criteria, namely,
(i): addressing the programme to protect and enhance the safety; (ii) eliciting WTP
from lay respondents; and (iii) linking WTP value with the numerical change in the
probability of death. These studies can be taken as to have used the conventional
method of conveying different levels of health risk to the respondents. The results of
the meta-analysis suggest that the sensitivity of WTP to probability variation in risk is
limited. That is, the WTP values are found to be insensitive to the scope of the goods
provided. In the second approach, the authors used a split sample test - consisting of
‘internal’ (within sample) and ‘external’ (between samples) tests of sensitivity to
magnitude of risk. Two surveys have been used to estimate the WTP for risk reduction
in two risk contexts, namely, transportation and food consumption. In Survey-1, the
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respondents were asked about only one risk, namely, dying in an automobile accident.
One-half of the respondents were conveyed a baseline risk of dying in a road accident
as 20/100,000 persons and the other half received a scenario with risk level of
25/100,000 person. Both the samples were asked about their WTP for purchasing a
‘safety bag’ that would reduce fatality risk to 15/100,000, and then to 10/100,000, from
the baseline risk. In Survey-2 also, WTP for a safety bag was asked in addition to the
food-risk scenario. But in Survey-2, an ‘indifference-risk’ approach is introduced to
‘alleviate respondents’ limited appreciation for the relative magnitude of numerical risk
changes, a factor that may cause elicited WTP to be insensitive to magnitude’ (p. 47).
Here, innovations that would make the respondents understand the risk and to remove
factors causing distortions between the preferences and the theory were used. The
innovations include: (a) presentation of analogies in the stimulus to understand the
respondents’ understanding of risk; (b) distinguishing respondents with high and lower
confidence levels; (c) information about the ‘increments’ in risk rather than ‘levels’ to
combat the tendency to focus on percentage change; (d) use of one-and-a-half-bounded
DC elicitation format in the food safety decision.
In this survey, the respondents were asked to choose between two lunch stands -
one is outdoor (cheap, more risky) and the other is indoor (more expensive, safer).
In the case of high-risk scenario, risk levels of 1/13,700 and 1/137,000 were given to
two sub samples, while the low-risk scenario with only 1/100 million has been assigned
to both the samples. The results of Hammitt and Graham (1999) study provide certain
useful insights. In the case of automobile survey, it was found that the indifference risk
approach (Survey-2) provided ‘statistically significant difference’ (between WTP
values) than the conventional approach (Survey-1). In Survey-2, it was also found that
the respondents with ‘high confidence’ in their answers provided WTP values that were
216
proportional to the price difference than the respondents with less confidence. Overall,
the authors conclude that the standard conventional CV methods do not provide
theoretically consistent results. Nonetheless, the author’s new approach that involved
indifference-risk elicitation is found to provide theoretically consistent results.
Therefore, the results of the meta-analysis and that of Survey-1 suggest that the
conventional preference elicitation methods are generally weak in making the
respondents to understand the differences in the level of commodity described. This
implies that the scope effect or embedding could be addressed through proper ‘study
design’.
The findings of Hammitt and Graham’s (1999) study are supported by their
follow-up study reported in Corso et al. (2001). Corso et al.’s (2001) study has used
visual aids to communicate two different levels of risk, namely, one in which the
annual risk of dying in a motor-vehicle crash was 2.5/10,000 and the other in which it
was 2.0/10,000. The information regarding the respondent’s willingness to pay for an
automobile safety devise (i.e. a side-impact airbag) that would reduce the annual risk of
dying in a motor crash to 1.5/10,000 was elicited through the ‘mixed-mode phone–
mail–phone survey’ among four sub sample groups of 1,104 final respondents. The
findings suggest that the WTP values for independent sub-samples presented with each
of the three alternative visual aids (a linear scale, a logarithmic scale and an array of
dots) were responsive to the magnitude of risk reduction. However, the WTP values
elicited from the fourth sub-sample that received ‘no visual aid’ was not responsive to
the magnitude. The conclusion of this study supports the notion that theoretically
consistent CV results could be obtained through improved and effective
communication devices. One of the general conclusions regarding occurrence of scope
effect in CV studies (that basically use conventional preference elicitation approach) on
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health risk is that WTP is not sensitive because, (i) respondents may not be sensitive to
variation in risk magnitude due to their lack of understanding of probabilities and poor
appreciation for numerical differences in magnitude (Kahneman and Tversky, 1973);
(ii) respondents do not treat the probabilities as applicable to them and base their values
on their prior beliefs and on the information contained in the scenario description.
Finally, the respondents may not value the health risk in line with the expected utility
theory (Hammitt and Graham, 1999). To conclude, we have analysed different kinds of
argument, supporting as well as rejecting the existence of embedding or scope effect in
CV results. In the case of studies reporting the existence of embedding, it is observed
that the fundamental flaws in the design of a survey instrument, improper
implementation of the survey, improper sampling procedure, inability of respondents’
understanding of the survey questions, the properties attributed to standard value theory
to substantiate the claims for embedding, etc., are some of the factors that are found to
cause this problem (Hanemann, 1994; Smith, 1992; Harrison, 1992). Mitchell and
Carson (1989) suggest survey design features to minimise the potential for part–whole
biases. Describing the larger and smaller commodities, and then asking respondents to
focus their attention on the smaller commodity, using maps and photographs to
describe the scenario, debriefing, providing opportunity to respondents to revise the
bids, etc., are some of the measures suggested to minimise the embedding in CV
studies (NOAA, 1993; Mitchell and Carson, 1989).
Dichotomous choice contingent valuation questions have gained popularity over
the last several years. This is due primarily to their purported advantages in avoiding
many of the biases known to be inherent in other formats used in the contingent
valuation (CV) method. Two standard references which discuss different CV
techniques are Cummings, Brookshire, and Schulze (1986) and Mitchell and Carson
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(1989). Whereas several varieties of bias may be minimized by dichotomous choice
valuation questions, this elicitation method can be highly statistically inefficient in that
vastly larger numbers of observations are required to identify the underlying
distribution of resource values with any given degree of accuracy. An alternative
questioning strategy, intended to reduce this inefficiency, was first proposed and
implemented by Carson, Hanemann, and Mitchell (1986). They advocate introducing a
second offered threshold in a "follow-up" dichotomous choice CV question which
elicits a second discrete response. In practice, if a respondent indicates a willingness to
pay the first offered amount, the new threshold is about double the first one. If the
respondent is unwilling to pay the first offered amount, the second threshold is reduced
to about half the original amount. This questioning strategy has also been called a
"double-bounded referendum" approach.
Arrow et al. (1992) advocate discrete choice contingent valuation questions
over other formats in their assessment of the reliability of CV techniques for
quantifying passive use values in the context of oil spills. However, they note
parenthetically that "If a double-bounded dichotomous choice or some other question
form is used in order to obtain more information per respondent, experiments should be
developed to investigate biases that may be introduced”. This research addresses these
possible biases for this double-bounded case. Carson and Mitchell (1987) employ
survival analysis statistical techniques to analyze dichotomous choice with follow-up
data. These methods were originally conceived to handle product failure data collected
at irregular intervals. Much of this literature has emphasized Weibull distributions for
the variable in question. Hanemann, Loomis, and Kanninen (1991) use maximum
likelihood models to analyze double-bounded referendum contingent valuation data
under an assumption of normality. Both of these papers, however, maintain the
219
hypothesis that a single implicit true valuation drives respondents' answers to both of
the questions in this survey format. This paper proposes a more-general maintained
hypothesis. Our estimation method allows the valuation information elicited at each of
the two stages to be the same, or different, as the data dictate.
Production is always accompanied by waste according to the Material Balance
Principle. To meet the need of rapidly growing population, it is obvious that production
has to be increased by at least the population growth rate which leads to waste creation
that is beyond the absorptive capacity of the environment. The management of solid
waste is one of the challenges facing urban areas in the world. An aggregation of
human settlement has the potential to produce a large amount of solid waste. Municipal
governments in the developed world have generally assumed the collection, transfer
and disposal of waste. Municipal Solid Waste (MSW) management has been a major
issue of concern for many under-developed nations, however, as population increases
(Zerbock, 2003). The problem of municipal solid waste management is compounded
as many nations continue to urbanize rapidly; 30-50% of the population in many
developing countries is urban (Thomas-hope, 1998) and in many African countries the
growth rate of urban areas exceeds 4% per annum (Senkoro, 2003).
Although developing nations do spend between 20 and 40% of municipal
revenues on waste management this is often unable to keep pace with the scope of the
problem. In fact, when African countries were asked by the World Health Organization
(WHO) to prioritize their environmental health concerns, the results revealed that while
solid waste was identified as the second most important problem (after water quality),
less than 30% of the urban population have access to proper and regular garbage
removals (Zerbock, 2003). Most attempts to improve solid waste management in cities
220
in developing countries, like India, have focused on the technical aspects of different
means of collection and disposal. Recently much attention has been given to
investigating the demand side aspects related to solid waste management (Hartwick,
1998). In India also the provision of solid waste management services had for long
been from municipality which had focused on the technical aspects of collecting and
disposal of solid waste. These arrangements to solve the problem of solid waste in
urban areas of the country have not been achieving the desired goal. This resulted in
searching for another alternative that better minimizes the problem of urban solid
waste. It was this trend that pushed / forced the Indian government to form an agency
that assumed the full responsibility of administering the management of municipal solid
waste since 2003. Since then there is an inclination towards the inclusion of the
demand side aspects of solid waste management in addressing the problem of
municipal solid waste management. Thus it is important to find efficient ways to treat
solid waste. The improvement in environmental quality these treatments produce may
lead to increase in individual and social welfare for which, in principle, there should be
a positive willingness to pay (WTP).
Developing countries have a range of solid waste problems, including:
inadequate waste collection systems, open dumping and other forms of improper final
disposal and the resulting environmental pollution, scavenging at landfill sites by waste
pickers, and illegal dumping. These problems are being aggravated by growing waste
generation rates associated with economic growth, increases in consumption levels, and
the transition to mass consumption lifestyles in developing countries. There is concern
that these problems, if left unaddressed, will become a serious challenge for
generations to come. This concern has been shared by the international community
since the 1990s. Agenda 21, a global action plan for sustainable development adopted
221
at the UN Conference on Environment Development in Rio de Janeiro (the Earth
Summit) in 1992, called for the environmentally sound management of solid wastes,
among other priority issues (Toru, 2004). A major implication of the pattern of
urbanization and rapid population growth in developing countries, like India, is
expanding adequate infrastructures, waste management service being one of them.
However, it seems that this has not been the case in developing countries in general and
in India in particular.
For instance, waste generation every day in Addis Ababa was estimated to be
1386m3 out of which 750m3 was left uncollected. That means out of the total amount
of waste generated about 46% remained uncollected and the rest 54% was collected
(ENDA, 1996/7). In another study, the amount of waste generated in Addis Ababa in
2003 was estimated to be 1841.8m3 every day (0.22kg per household per day on
average). Out of this, about 50 - 60 % is collected and the rest is unattended
(Walelegne, 2003). The above examples may imply that ongoing SWM has become a
major problem both for the concerned authority and the population in Addis Ababa in
terms of the environment, economy and health. It is common observing the sanitation
workers busy removing garbage from roads, drainage systems, and streets in Addis
Ababa, the implication of which is extra cost is being incurred. Thus it is reasonable to
say that the amount of solid waste left uncollected in the city of Addis Ababa is
significant implying that the service is not being given satisfactorily for the population
living (residing) in it. If the accumulation and diffusion of solid wastes in this city
continues the way it is now, property values, scenery and aesthetic values,
environmental and health problems will get worse and in general quality of life
deteriorates. To reduce the adverse effects of the solid waste in terms of economic,
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health and environmental impacts and provide efficient service for the population of
concern there has to be a way out of it, and this is partly addressed in this study.
Currently one of the major problems facing urban cities of developing
countries, like Ethiopia, is lack of efficient infrastructure such as solid waste
management service for urban households which was assumed by the municipality and
efforts made to improve it emphasized to a large extent on the service providers only,
ignoring or giving less emphasis to the demand side. Therefore, this study, as it focuses
on the demand side of the SW management service, is expected to provide the
following valuable information both for the public and private policy makers
concerning solid waste management services in designing of municipal SW
management service and service charge rates, and in understanding the role that
households can play in solid waste management. Another important contribution of
this study is that it can be used as the starting point in applying Choice Modelling (CM)
which to our knowledge has not been applied in any of the environmental valuation
studies conducted so far on SW management service either in Addis Ababa or in other
towns in the country. In general, knowledge obtained from this study may help to
reduce the gap between the service that will be provided and the public demand for SW
services.
In Ethiopia, particularly in Addis Ababa, a lot of contingent valuation method
(CVM) based studies have been made on improvement of solid waste management
services in the last decade. To begin with, Yitbarek1 (1998) undertook a CV survey on
solid waste collection in A.A by selecting 210 households in which a face to face
interview was conducted and open ended question method was applied to elicit
respondent’s willingness to pay (WTP). In his research, linear and log-linear models
223
(OLS) were used to study the significance of the independent variables- respondent’s
interest in environmental problems, awareness of solid waste problems, perceived level
of the existing solid waste collection system, responsibility or various solid waste
problem, age, sex, family size, level of education and house hold income. Of all these
variables, awareness of solid waste problem, household income and interest in
environmental problems were important factors determining respondents’ WTP values
(Yitbarek 2003). Aklilu2 (2002) used CVM, based on closed ended with a follow-up
format, to elicit willingness to pay for an improved solid waste management of
households’ of Addis Ababa, drawing 430 households at random. The model used in
the study, the Tobit model, showed that the income of households, time spent in the
area, quantity of waste generated, responsibility of solid waste management, education
dummies, ownership of the house and the number of children had a positive and
significant effect on WTP. Hagos (2003) also used CVM in his study to elicit
individual willingness to pay for improved solid waste collection and disposal services
for Mekele town. He employed an open ended with the iterative bidding game format
and selected a total of 164 households using stratified sampling based on the smallest
administrative unit ‘Kebele’ thereby applying systematic random sampling for selecting
households from each stratum. He employed Ordinary Least Square (OLS) in
estimating the bid function where the Willingness To Pay (WTP), is function of sex,
age, education, household size, household income, house ownership, household
awareness about SW problem, household satisfaction with the existing level of SW
service. Of these variables, household’s income, awareness about SW problem, age,
size of the household, were found to significantly influence the dependent variable
(WTP).The remaining explanatory variables were found insignificant. Walelegne
(2003) conducted a CVM survey on valuation of improved solid waste management in
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Addis Ababa. He selected a sample of 500 households using two stage stratified
sampling followed by a random sampling applied on each stratum to ensure
representative ness. The information on different characteristics of households obtained
from the survey was used to test the model that explains WTP for improved solid waste
services as a function of income age, sex, education, and number of children, wealth,
and interest in environmental issues, service provider dummies and starting bids. The
results using Ordinary Least Square (OLS) and the result showed that income,
education, wealth, and types of service (private versus public) were significant while
the remaining repressors were found insignificant in influencing households’ WTP for
improved solid waste management service. The literature review shows that almost all
the studies made to evaluate the non-market environmental goods in Addis Ababa and
other towns in the country, particularly on solid waste management services, employed
the contingent valuation technique (CVM) to elicit consumer’s willingness to pay for
an improvement in the non marketed environmental goods. The potential socio-
economic, demographic and other factors that influence household’s willingness to pay
for improved solid waste management options attribute can be identified from the
literature review. It also shows that majority of the studies used the Ordinary Least
Square (OLS) for their estimation. It is clear from the literature review that the WTP
was used to estimate only the total economic value to a society of a marginal increase
in the non-marketed environmental good as a whole as CVM cannot value the
environmental improvement brought about by an increase in a solid waste management
attribute. CVM as a technique to reveal individual’s preference for non marketed
environmental commodities also suffers from several potential biases such as strategic
bias, information bias, hypothetical bias, constant budget bias and interviewer or non-
respondent bias.
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Given the above background and the flaws with respect to CVM as a technique
of revealing individual preference for non-marketed environmental commodities and
others, it is reasonable to find a technique that takes into account the pitfalls in CVM as
a technique in revealing individual preferences for valuing the marginal as well as the
aggregate benefits brought about by a change in an attribute in solid waste management
option. The technique thought appropriate for the proposed study, is the Choice
Modelling (CM). CM has never been used, as to the best of our knowledge, in valuing
the benefits to a society of improvement in environmental quality as a result of a
marginal change in an attribute of a SW management option in Addis Ababa in
particular, in Ethiopia.
Let us go into the research area where CV can be used as a tool to measure the
Willingness to Pay to improve Solid Waste Management (SWM) in Tirunelveli
Corporation which is being highly environmentally deteriorated due to various
improper management.
Today, the municipal solid waste affects environment in several ways and
challenges faced by Tirunelveli Corporation is one of the most serious. Therefore, this
study would bring about the existing practice of solid waste disposal is ineffective
which cause unhygienic environment and thereby to frame a new strategy to improve
the solid waste management from the threshold level. However, the chronic problems
of effective municipal solid waste disposal throughout Tirunelveli city are daunting
task. The waste collection in India is much unorganized. The collection bins used in
various cities are neither properly designed nor properly located and maintained. This
has resulted in the poor collection efficiency. The average collection efficiency for
MSW in Indian cities and states is about 70% (Khan, 1994; Maudgal, 1995; Gupta et
226
al., 1998; Nema, 2004; Rathi, 2006; and Siddiqui et al., 2006). The Central Pollution
Control Board (CPCB) has collected data for the299 Class-I cities to determine the
mode of collection of MSW. It has been observed that manual collection comprises
50%, while collection using trucks comprises only 49% (CPCB, 2000b).
Under this circumstance, it is every individual’s responsibility to preserve the
urban environment very sound which preserves the environment in a sustainable
manner for future generation. Thus the question must be raised – where does the
money come from? Inevitably, its the responsibility of the urban dwellers who have
been resorting good environment for their healthy livelihoods. At the end, however,
everyone in the city-dwellers and business alike- have to bear the operating and
maintaining cost for clean environment, since all stand to gain in terms of better
environment. In carrying out a survey about their Willingness to Pay, the people who
pay must be convinced that the end result is worth the expense.
The analysis was divided into two parts. The first explored the respondents’
willingness and ability to pay for the improving Solid Waste Management. The second
part formulated econometric models to estimate the respondents’ WTP.
Here, the researcher has used regression models in which the dependent or
response variable itself could be dichotomous in nature. Basically, a ‘Yes’ or ‘No’ type
answer was received from the respondents with regard to the MSW. The researcher has
used 1 or 0 value to measure this. Some of the respondents were willing to pay and
some were not. To estimate and infer problems, Logit Model is used. The researcher
has classified all categories according to their actual contribution, in terms of rupees, to
avoid foul smell or odours nearby his/her residence. It founds that nearly 33.73 per cent
of the respondents were not willing to pay to improve MSW. To measure the actual
227
contribution of the respondents for MSW management for better management, the
researcher has used the Tobit Model.
WILLINGNESS TO PAY
The respondents’ willingness and ability to pay for improving MSW
management for better environmental quality provides useful information not only in
understanding the basic characteristics of the respondents but also in properly
distinguishing them when formulating WTP estimates.
Table:-5.1. WTP responses towards Municipal Solid Waste
S. No Opinion Percent
1 Willing and able to pay 66.27
2 Willing but unable to pay Nil
3 Able but unwilling to pay 33.73
4 Unable and unwilling to pay Nil
5 Others Nil
Source: Computed data
The above table 5.1 shows that majority of the respondents (66.276%) are both
able and willing to pay for the service. Nearly 33.73 percent of the respondents are
unwilling to pay to improve solid waste management for diverse reasons. For example,
they said they have already paid taxes to the Corporation, such a facility should be
provided by the Corporation or most of the solid waste generates from the industrial
sector and some extent affordable people are highly responsible for more solid waste
generation.
228
WILLINGES TO PAY ESTIMATES
The analysis on WTP estimates was based on qualitative approach, and it
attempts to explore the factors governing the decision whether a person was willing to
pay for improve MSW in Tirunelveli Corporation for better environmental quality. The
exploration of whether a person is willing to pay for the improving MSW management
was done using a logit model. The model was chosen because of its ability to deal with
a dichotomous dependent variable and a well-established theoretical background.
Consider, the specification of the Logit equation is,
WTP=a+b1AGE+b2SEX+b3MS+b4INCOME+b5DIS+b6RUPWTP+b7HCOST+
b8WLOSS+b9PRIEDU+b10HEDU+b11DEDU+b12PRI+b13GOVT+b14BUSI+
b15PQUAL+b16MQUAL+b17FAIRLY+b17HIGHLY+Ui
Where,
Dependent variable WTP=1; if willing to pay for solid waste improvement=yes
= 0 otherwise
Dummy Independent variables (Description)
b1 = Age of the respondent (years)
b2 = 1 if Sex = Male, 0= otherwise
b3 = 1 if Married, 0=otherwise
b4 = 1 if Income earner, 0=otherwise
b5 = 1 if Distance is closer to Dustbin, 0=otherwise
b6 = 1 if Rupee Willingness to Pay, 0=otherwise
b7 = 1 if Health Cost is high, 0=otherwise
b8 = 1 if Wage loss, 0=otherwise
b9 = 1 if primary educated, 0=otherwise
229
b10 = 1 if high school educated, 0=otherwise
b11 = 1 if graduated, 0=otherwise
*Base Category – Illiterates (for education)
b12 = 1 if private employee, 0=otherwise
b13 = if govt. employee, 0=otherwise
b14 = 1 if business, 0 =otherwise
**Base category- Unemployed
b15 = 1 if SWM is poor, 0=otherwise
b16 = 1 if SWM is fair, 0 =otherwise
*** Base category- Very Poor
b13 = 1 if the person is fairly accepted to improve Solid Waste, 0=otherwise
b14 = 1 if the person is highly accepted to improve Solid Waste, 0=otherwise
****Base category – not at all interested to pay WTP for SWM
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Table : 5.2
Logit Estimates of WTP for Improvement of Solid Waste Management
Dependent variable: WTP (Willingness to Pay to improve SWM)
Independent Variable Co-efficient Marginal Effects
CONSTANT 0.39776 (2.51) 0.0119
AGE -0.00109 (-0.83)*** 0.4067
SEX 0.03530 (0.89)** 0.3734
MS -0.00453 (-0.08)*** 0.9361
INCOME -9.71238 (-3.59)* 0.0003
DISTANCE 7.20779 (0.73)** 0.4642
RUPWTP 0.00557 (19.51)* 2.8865
HCOST 1.42612 (0.12)*** 0.9033
WAGE LOSS 1.02141 (1.36)** 0.1721
PRIMARY 0.12401 (1.93)** 0.0524
HIGH 0.09747 (1.55)** 0.1193
DEGREE 0.18956 (3.08)* 0.0020
PRIVATE -0.20014 (-1.75)*** 0.0784
GOVT -0.15817 (-1.44)*** 0.1471
BUSINESS -0.16333 (-1.43)*** 0.1511
POOR -0.00644 (-0.15)*** 0.8793
MIDDLE 0.04714 (1.04)** 0.2980
FAIRLY 0.05496 (1.04)** 0.2945
GREATLY 0.11306 (2.32)* 0.0199
Log likelihood 113. 0455
Restricted log likelihood 129. 8231
Chi-square 46.10672
Pseudo R2 0.37
Source: Computed from primary data
Note: figures in parenthesis show the t-values
*Statistically significant at the 1% level;
** Statistically significant at the 5% level;
*** Statistically significant at the 10 % level
231
The actual estimation in the logit model is to formulate to capture a simple
Yes/No answer on whether a respondent’s would pay to improve municipal solid waste
management in Tirunelveli city. All the data were employed at this stage in order to
understand a broad perspective of the factors underlying a respondent’s decision. This
survey report of WTP for the improvement of solid waste management has been
included; the data from various stretches were pooled to get a WTP group. Out of 510
respondents that were questioned on their willingness to pay to improve solid waste
management, 322 that is, 63.14 percent gave positive answers while the rest gave
negative answers. These results have several noteworthy features. First, the model has
a good fit. The chi-square value is 46.10, which is highly significant at 1 percent.
Pseudo R2 value is 0.37, which means that about 37 percent of the variables in WTP are
explained by the included independent variables. Almost all the independent variables
have positive influence on WTP except the variables of occupational classifications.
Age variable is positively related to WTP. As the age goes up, the probability of WTP
also increases. The variables – sex, income, education and distance – have a higher
probability of influencing WTP for improving municipal solid waste management in
Tirunelveli city. In the case of sex variable, there was a higher probability of positive
response from female respondents towards improving solid waste management
compared to male respondents. Awareness and income level was also higher among
the female respondents compared to the males. When the respondent’s income rises by
1 percent, the probability WTP for better municipal solid waste quality also rises by
0.0219 percent. Distance has a positive significance. Respondents residing closer to
street dust bins showed higher probability for WTP for improving solid waste
management. WTP dropped when the street dust bins little away from the dwellings.
Those dwellings near the landfills or disposal areas are important factors to decide
positive influence on WTP since the coefficients of the variable is positive, it implies
232
that a respondent, who has a higher education, knows about the importance of
improving solid waste management in urban city and who has a higher probability of
paying for it. Age and income are having a positive significance at 1 and 5 percent and
sex has 5 percent level of significance.
The variable health cost also play a major role in determining WTP. If the
health cost was high, the probability of WTP for improving the solid waste
management increased at 10 percent level of significance. Wage loss was less deciding
criterion for WTP among the respondents. It directly influenced WTP and indicated a
positive sign and significance at 5 percent. It was a good sign among the respondents
that deterioration of health was due to improper management of solid waste disposal
and something has to be done to improve the surrounding environment.
Education at Primary and High school education had a negative sign and
significance at 5 percent. But education at degree level had a positive sign at 1 percent
level of significance. Thus, education may also be interpreted as a proxy for the
knowledge about the poor quality of solid waste management practices taking place in
Tirunelveli city and it clearly highlighted the importance of education at graduation
level. As the level of education goes up, the probability of WTP for improving solid
waste management goes up. This was evident with respondents who had degree level
education and those who had primary and high school level education do not have
much aware of municipal solid waste improvement. It had a positive sign and
significance at 5 percent confirming the earlier results.
Occupation with private, government and business groups had a negative
impact on WTP. The respondents who have been working in the private sector are
getting lower wages causing poor response towards WTP for improving municipal
solid waste management.
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Table:-5.3. Tobit Estimates of WTP for Solid Waste Management Improvement
Dependent variable: Willingness to Pay (WTP)
Independent Variables Co-efficient Marginal Effects
CONSTNAT 0.18581 (0.79) 0.4266
AGE -0.00168 (-0.86)*** 0.3865
SEX 0.05621 (0.96)** 0.3332
MS -0.00250 (-0.02)*** 0.9763
INCOME -1.4628 (-3.65)* 0.0002
DISTANCE 9.93958 (0.68)** 0.4957
RUPWTP 0.00764 (17.09)* 2.8865
HCOST 1.07757 (0.06)*** 0.9515
WAGE LOSS 1.41199 (1.29)** 0.1947
PRIMARY 0.19387 (1.97)** 0.0483
HIGH SCHOOL 0.14875 (1.54)** 0.1227
DEGREE 0.2856 (3.05)* 0.0022
PRIVATE -0.29345 (-1.75)*** 0.0786
GOVERNMENT -0.22826 (-1.42)** 0.1528
BUSINESS -0.23514 (-1.40)*** 0.1592
POOR -0.00925 (-0.14)*** 0.8834
MIDDLE 0.07359 (1.09)** 0.2720
FAIRLY 0.08049 (1.02)** 0.3056
GREATELY 0.16324 (2.23)* 0.0251
T.NALLUR 0.00904 (0.13)*** 0.8932
P.KOTTAI -0.06933 (-0.92)*** 0.3570
M.PALAYAM -0.02614 (-0.35)*** 0.7257
Sigma 0.478
Likelihood function 2029.1032
N 338
Source: Computed primary data
Note: figures in parenthesis show the t-values
*Statistically significant at the 1% level;
** Statistically significant at the 5% level;
*** Statistically significant at the 10 % level
234
Under this Tobit model, each variable has its own significance. In this model,
the actual value of WTP is directly linked with the respondent’s Willingness to Pay for
improving municipal solid waste management. If the coefficient sign were positive, one
unit increase in age when other things remain constant would increase the WTP amount
by about 0.14 percent. Sigma value (0.478) is highly significant. Because of this OLS
is an unbiased estimate, which is highly significant, and it shows that leaving the
sample would lead to selection bias. It is the case with that of the variable sex. It
would increase the probability of WTP by about 0.3332 percentages for 5 percent. If
the distance decreases, the probability of WTP increases by 0.4957 percent. Health
cost and wage loss have negative influence on WTP and some extent variable health
has got positive influence at 5 percent level of significance. It would increase the
probability by 0.9515 percent and 0.1947 percent respectively. Education has much
influence. As expected, it had improved the WTP amount at each level of education,
namely, primary, high school and degree level, by about 0.0483 percent, 0.1227 percent
and 0.0022 percent respectively. Occupation doesn’t care about the poor maintenance
of solid waste management and less concerned about improving it. Therefore, as
predicted in theory, so many reasons influence them to deviate. It has negative sign
and insignificant too. However, the variables government employees and business
group have a positive effect on WTP. In contrast, one unit increase in the business
group variable will influence WTP by 0.1592 percent as against the government
employee, which is just 0.1528 percent. The respondents have responded to the
personal health loss due to solid waste as a subjective variable that influences an
increase in the WTP amount by 0.3056 and 0.0251 percent, respectively, for fairly
affected and highly affected variables. Thus, the Tobit Model is a good model to
explain the results.
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The variable of different zones also influences WTP for improving municipal
solid waste management. One unit rise in all three zones would increase WTP by about
0.8932, 0.3570 and 0.7257 percent respectively. Melapalayam (M. Palayam) zone is
being generated more solid waste might have positively influence towards WTP since
New Bus Stand comes under this zone and it also has huge Muslim population who
have more mutton and chicken stalls to generate huge volume of solid waste in this
region. Another significant factor needs to be noted that, the lifestyle of the people in
this zone is also one of the influence factor to generate more solid waste. The
percentage of respondents who said ‘yes’ for WTP is less compared to other zones,
whereas the actual mean WTP is high for Palayamkottai and Thatchanallur zones
showing their high income status. However, WTP is not much attracted as we expected
in all the zones towards solid waste management. It has the negative sign but positive
insignificant value. .
Above all, it might be possible and correct to directly formulate a linear
regression model using Ordinary Least Square (OLS) method using maximum WTP
figures as a dependent variable. Similar to WTP, the data employed also exclude that
of protest bid. In addition, outliers are also identified and excluded from the estimation
process. The outcome of the OLS model is given in Table 5.2 and the outcomes of
both linear models are mostly as expected, not only in terms of variables that affect the
fees but also their signs and levels of significance. For WTP, coefficients of
referendum fee, level of education, income, need of the study, severity of existing solid
waste management practices and whether a respondent is living near street dust bins are
observed to be significant. Their positive relationships are also consistent with what
we have predicted. It should be noted that sex seems to play a significant role in
determining WTP in this equation. However, a relatively low R-squared is a bit of
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concern. The explanation might lie on the fact that the actual fee (value of WTP) that
respondents are willing to sacrifice has a very wide dispersion and their increments are
very small, making it difficult for a model to precisely determine each individual
figure. Results indicate a significant positive relationship between the referendum fee
and the stated fee.
Regression results indicate that 46. 10 percent of the variation in WTP was
explained by the hypothesized household characteristics R2 0.37. Only age and marital
status were not significant in explaining household WTP, the latter variable perhaps
due to multi-colinearity. All coefficients for the income and education variables were
highly significant and negative as expected, suggesting that respondents who were
degree holders (17.25%) with household’s incomes of Rs. 15,001 to Rs. 20,000 or more
were willing to pay significantly more than those in other income and education
categories. Hypothesis testing indicates that respondents who were degree holders with
household incomes between Rs.15,001 to Rs.20,000 were also willing to pay
significantly more than most respondents with less education and equal or less income.
This finding, in conjunction with the lack of significance of most other differences in
the above table suggests that income and education may not significantly influence
WTP unless a respondent has a degree holder. The significance of the coefficient for
income and education suggests that degree holders who were in the highest income
class were willing to pay about Rs.300 more than degree holders with household
incomes between Rs.20,001 and Rs.25,000. Hence, for degree holders, the level of
income appears to be important.
The coefficients for sex, 0.96 had their hypothesized signs and were highly
significant. Female respondents (SEX) were willing to pay about Rs. 175 more than
237
male respondents, while respondents who depended on piped water or bottled water for
drinking were willing to pay about Rs.60 less than those who relied on bore well or
river water. Those who said they were very concerned about health risks from the
proposed landfill were willing to pay Rs.300 more than those who said they were
unconcerned. Another major finding of the results show that household size
significantly reduced WTP only for households with more than four members. It seems
possible that the lack of difference in WTP between the one-to-three person households
may be due to likely presence of children in the latter offsetting the effect of the lower
per capita income on ability to pay. The year of residence in Tirunelveli is also
significantly determines WTP. However, certain anomalies existed in its parameter
estimates. Because of the residence loyalty, one might expect that the respondents who
had lived in Tirunelveli City longer to be willing to pay more than those who had
moved in more recently. Another interesting point to be noted in the field survey, the
household characteristic that exhibited an unusual patter in its coefficients was that the
household’s distance from the dustbins. Respondents who lived closer to the dust bin
were expected to be willing to pay more than those who lived farther away. This
pattern holds for distance of up to 500 meters, with households who lived within 100
meter or 200 meter willing to pay between Rs.200 and Rs. 150 more than those who
lived between 300 to 500 meters. However, those who lived more than 300 meters
from the dust bin were not willing to pay significantly less than those who living within
200 meters. They were, in fact, willing to pay significantly more than those households
located between 300 meter to 500 meters.
These findings are valuable to policymakers for several reasons. First,
Tirunelveli Corporation is to develop comprehensive waste management plans could
use a similar approach in evaluating the external costs or benefits of all wastes disposal
238
alternatives including using of street dust bins, landfill disposal, incineration and
recycling. If such expenditures are to be made in a cost-effective manner, more
complete analysis is needed to compare the total costs of all solid waste disposal
alternatives. Second, if minimizing overall costs were the only objective and if similar
results were found to hold for other areas, one might conclude that landfills should be
sited in areas with fewer degree holders in higher income classes. However, equity
considerations would likely limit acknowledgement of such a strategy, at least
explicitly or officially.
Conclusion
The increasing threat posed to human health as a consequence of improper way
of MSW dumping in Tirunelveli Corporation has become burning issue in recent years.
This research work has attempted to introduce environmental tax in order to improve
solid waste collection by the way of WTP. The results of the WTP indicate that
unhygienic conditions and mosquito menace due to unplanned dumping of MSW. The
survey result shows that the respondents are well aware of the present situation of
MSW collection and management by the Corporation and the necessity of their
participation to maintain the city clean and tidy. The study results also give a positive
scope for introducing environmental tax (user fee). Most of the WTP studies carried
out in developing countries in the past have been mainly limited to the estimation of
user’s mean WTP and sometimes been controversial. This research has pioneering
attempt to extend the use of WTP survey results indicating that charging for improving
the solid waste management in Tirunelveli Corporation may not have negative impact
amongst the city dwellers. In this case of observed behaviour method, the assumptions
made about the use of WTP for MSW quality improvement services may be far from
239
true in the developing countries. Also, there could be difficulties in charging excessive
amounts as WTP because of low levels of education and incomplete perception about
environmental values due to lack of awareness. The paucity of adequate data on the
degree of solid waste and its effects on people’s health cannot screen the fact.
Generally, the community and nature in general can only be speculated but the fast
deteriorating trend of the urban civic environment can never been denied. It has been
discussed (See Chapter IV) that the rate of vector borne diseases has been increasing at
an alarming rate in recent days due to improper maintenance of MSWM. If the present
quantum of MSW generation continues to exist in future without taking preventive
steps by the Tirunelveli Corporation to control it, the society’s foregone health
expenditure would become many folds which menace huge burden among the people.
The most important requirement is to do the proper urban MSWM planning and
execution. The District administration is needed to help with the corporation hand in
hand for better implementation of solid waste regulation among the public in order to
achieve sustainable civic environment.
240
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