In developing countries contingent valuation (CV) has become an important tool for estimating willingness to pay (WTP). So far, however, the CV studies usually have not assessed the validity of the WTP estimates mainly due to ambiguities in the criteria for scope sensitivity analysis. In this article we clarify the criteria from theoretical and empirical aspects. The main debate on scope sensitivity analysis targets the proportionality theory: One group supports strong proportionality, and the other group supports weak proportionality. We highlight the shortcomings of strong proportionality and support weak proportionality. We set up the criteria for statistical significance and plausible responsiveness between the WTP and its explanatory variables. We conducted scope sensitivity of our case study from rural Pakistan to show its applicability in developing countries and to test the validity of our WTP estimates. Statistical analysis, based on the maintained hypothesis, reveals that the magnitude of the benefits and per capita income are significant variables that influence the WTP. The Kruskall-Wallis test reconfirmed the significance of the size of the benefits. Plausible responsiveness is evident from the influence of the household characteristics over the WTP. Finally, we concluded that CV can provide valid results in developing countries if the survey is conducted according to the mainstream guidelines. Further empirical testing is required to support the criterion of plausible responsiveness.
ASJC Scopus subject areas
- Economics and Econometrics
- Management, Monitoring, Policy and Law