Jeff_Bennett Presentation Economics Beyond Markets: Choice Experiments in Developing Countries

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June 21, 2010 IFPRI Policy Seminar
Washington, DC
Economics Beyond Markets: Choice Experiments in Developing Countries
Jeff Bennett
Ekin Birol
Derek Byerlee

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Jeff_Bennett Presentation Economics Beyond Markets: Choice Experiments in Developing Countries

  1. 1. Economics Beyond Markets: Choice Experiments in Developing Countries Jeff Bennett
  2. 2. Background  Policy principles: • Information based • People focused • Transparent  Markets are one source of information on peoples’ preferences  BUT … when markets are ‘thin’, distorted through interventions or non-existent?  Need to look beyond markets: Choice experiments
  3. 3. Choice Experiments  Ask people about their preferences in a survey  Respondents asked to make a sequence of choices  Options available described: • Product ‘attributes’ • Product cost  Designed to: • ‘mimic’ an existing thin or corrupt market • Create a ‘pseudo market’
  4. 4.  Choice options vary as attributes and cost take on different levels  Choice options cover the full spectrum of possibilities  Choices demonstrate respondents’ willingness to trade-off the product attributes and cost  The ‘marginal rates of substitution’ between the attributes and cost: ‘implicit prices’ or WTP  Simulate ‘market share’ for ‘new’ products
  5. 5. A choice question In 20 years Area of Number of Number of New tax time Vegetation species jobs lost No change 1000 ha 27 50 $0 in NRM New NRM 1 4000 ha 28 40 $40 New NRM 2 3000 ha 32 35 $60
  6. 6. A choice question Taste Packaging GM Price Old ** Plastic No $3.20 product New **** Foil No $5.00 Product 1 New ** Plastic Yes $3.00 Product 2
  7. 7. Applications  An established technique in developed countries  Commercial market research: • New product identification and development • Regulation impacts  Transport economics: • Introduction of new public transport modes, impacts of tolls, changing services  Health economics: • Public hospital services, treatment options
  8. 8.  Environmental economics: • Estimation of non-market benefits and costs • ‘Use values’ – choices regarding visitation to recreation sites • ‘Non-use values’ – WTP for environmental protection  Food policy: • Food safety impacts on demand • GM food attributes
  9. 9. Policy significance  EU Directives require CBA inclusive of non-market values  Sanctioned by DEFRA in the UK  Damage assessment cases in the US  In Australia: • Regulatory Impact Assessments • Planning Assessment Commission • Food Safety Authority  The Environmental Value Reference Inventory (EVRI)
  10. 10. … and developing countries  Technique provides useful, practical policy- orientated results BUT has complexities  Can it’s potential be untapped in developing country contexts?  Communication issues?  Choice difficulties?  Social setting compatibility?  Institutional setting compatibility?

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