Presentacion willingness to pay

1. Evaluating factors of the willingness to pay to mitigate the
environmental effects of freight transportation crossing the
Pyrenees
EURO-INFORMS Joint International
Conference 2013 in Rome, Italy
Rome, July 1-4, 2013
Fernando Lera-López
Department of Economics
Javier Faulín
Adrian Serrano
Department of Statistics and
Operations Research
Mercedes Sánchez
Department of Business
Administration
Public University of Navarre, SPAIN

2. 0. Contents
1. Introduction
1. Geographical scope
2. Main References
3. Methodology
1. Contingent valuation survey
2. Description of the variables
3. Statistical models
4. Discussion results
5. Conclusions
6. Future researches
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3. 1. Introduction
 Transportation has become an essential sector of the economy and a
major contributor to economic and social development in the world.
 However, transportation also has negative effects, such as noise pollution,
traffic congestion, air pollution, among others.
 Anything that sheds light to the costs evaluations related to environmental
damages and individuals’ willingness to pay those costs is interesting.
 Goal: This work aims to analyze the determinants of individuals’
willingness to pay (WTP) to mitigate externalities.
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4. 1.1 Geographical Scope
 While others studies focused on transportation in big cities, here the
attention is paid on transportation crossing villages.
 Concentrating on the particular case of residents in the bordering regions
of the Pyrenees in Navarre (Spain)
 Five routes were chosen, all beginning in Pamplona.
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5. 2. Main references
 First group of references:
Mitchell, RC. Carson, RT., 1989. Using Surveys to Value Public
Goods: The Contingent Valuation Method.
Cragg, J., 1971. Some statistical models for limited dependent
variables with application to the demand for durable goods.
Maddala, G.S., 1983. Limited Dependent and Qualitative Variables
in Econometrics
Moulton, B.R., 1990. An illustration of a pitfall in estimating the
effects of aggregate variables on micro units
 Second group of references
Barreiro, J., Sánchez, M., and Viladrich-Grau, M. 2005. “How much
are people willing to pay for silence? A contingent valuation study
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6. 3. Methodology
1. Contingent valuation survey
2. Description of the variables
3. Statistical models
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7. 3.1 Contingent valuation survey
 The contingent valuation survey was answered by 900 adults.
 It contains 3 sections:
1. Introduction, in order to explain the problem
2. The contingent valuation process
3. Classifying questions about environmental topics
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8. 3.1 Contingent valuation survey
 An important issue in WTP questionnaire design is the choice of
starting bid, which respondents use as a reference for their replies.
 The starting offer levels were therefore carefully chosen, taking into
account the results obtained in similar projects using Contingent
Valuation Methodology
 Three equal subsamples were constructed with starting bids set at €15,
€30 and €45 that will be paid as an annual tax per household.
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9. 3.1 Contingent valuation survey
 Scenarios proposed
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Contamination zone
(distance)
A B
Noise reduction (dB) 70 - 50 70 - 60 60 - 50
Pollution reduction 50% 25% 50% 25%
Initial bid (€) 15 30 45 15 30 45 15 30 45 15 30 45
Type of
questionnaire
1 2 3 4 5 6 7 8 9 10 11 12

10. 3.2 Variables
 We can classify our selected variables in five different types:
 Bid price
 Variables related to externality concern.
 Variables related to socio-demographic aspects.
 Physical measurements of externality variables which detect the
pollution level of the survey zone.
 Some local contextual variables that depend on each village.
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11. 3.3 Statistical models
 Double Hurdle model
 Each respondent decides whether or not to participate in the market
independently and chooses independently his/her level of
participation (WTP).
 First of all, it needs a Probit model estimation to evaluate the
inclination to pay.
 Secondly, it needs the estimation of a truncated regression model to
obtain the amount.
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12. 3.3 Statistical models
 Moulton correction
 Local or contextual variables (the level of education in the municipality,
percentage of primary residences in the municipality, and the social
perception of environmental problems) constrain residents’ reactions.
 Those variables were included from others sources (Spanish Institute of
Statistics-INE). So that, we merged aggregate data at the municipality level
with the individuals’ data obtained from our survey.
 This assumption caused a statistical problem identified by Moulton (1990):
there exist correlation in random perturbation, what implies a serious bias
and creating inefficient estimators.
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13. 4. Discussion Results
 Willingness to pay
13
Noise Air pollution
Propensity 59% 64%
Mean WTP 8.22 9.31

14. 4. Discussion Results
 Determinants of the Willingness to pay. Noise affected.
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NOISE AFFECTED
Double Hurdle Model Moulton Model
Probit Truncated Probit Truncated
Constant -0.7 -0.82 -0.65 1.22
Price 0.002 0.15 0.008** 0.07
Environmental Concern Variables
Noise_Perception
Traffic_Noise_Affect
Hearing_Problems
Road_Extern_Concern
0.35***
0.19**
-0.4*
0.11*
-0.032
3.3**
-2.41
2.16*
0.33***
0.15
-0.6***
0.14***
2.77***
2.33*
-3.7**
2.19***
Socio-demographic Variables
Age
Education_Level
Urban Habitat
-0.01
0.12
-0.05
-0.05
1.08
6.0*
-0.01**
0.15**
0.13
-0.07
1.65*
6.68***
Physic Externalities Measures
Pollution Zone
Higher_Reduction
0.13
0.003
-5.7*
0.18
-0.04
0.002
-1.48
0.12
Contextual Variables
Age_Mean
University_Studies
Primary_Residence
Primary_Residence_Noise
Primary_Residence_Pollution
Transport_registration
0.01
-1.37
0.002
0.017
-0.03
1.77
-0.6*
46
0.002
0.10
-0.13
38**

15. 4. Discussion Results
 Determinants of the Willingness to Pay. Air Pollution affected
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AIR POLLUTION
Double Hurdle Model Moulton Model
Probit Truncated Probit Truncated
Constant 1.59** 10.5 2.23 44***
Price 0.005 0.08 0.002 0.07
Environmental Concern Variables
Noise_Perception
Traffic_Noise_Affect
Hearing_Problems
Road_Extern_Concern
-0.5***
0.18*
-0.13
0.08
1.18
2.49**
-0.88
1.29
-0.3***
0.17**
-0.17
0.11*
-3**
2.5**
-1.35
1.59***
Socio-demographic Variables
Age
Education_Level
Urban Habitat
-0.01
0.09
-0.09
-0.001
-0.48
3.92
-0.006**
0.17***
0.41***
-0.05
1.08**
6.7***
Physic Externalities Measures
Pollution Zone
Higher_Reduction
-0.01
0.01***
-2.44
-0.03
-0.02
0.009
-0.94
0.11*
Contextual Variables
Age_Mean
University_Studies
Primary_Residence
Primary_Residence_Noise
Primary_Residence_Pollution
Transport_registration
-0.009
-0.59
-0.014*
0.019**
0.004
2.5**
-0.99**
48
-0.18*
-0.02
0.22*
45***

16. 5. Conclusions
 Noise and air pollution associated with road transportation is a social
and public concern in the zones bordering the Pyrenees.
 Therefore, those zones are facing a serious problem due to the
environmental problems of road traffic
 Noise reduction is less appreciated than air pollution abatements in
rural areas in the Western Pyrenees.
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17. 5. Conclusions
 Respondents who are more worried about environmental issues from
road transportation increases their Willingness to Pay.
 Younger people and with higher studies have a greater propensity for
payment.
 Environmental policies focused on increasing social and individual
concern will positively impact the WTP to reduce air and noise
pollution.
 In areas with special environmental value. No payment policy could
balance the potential damage caused by transportation in those areas.
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18. 6. Future Researches
 Running experiments with real money
 Update surveys
 Others zones
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19. Evaluating factors of the willingness to pay to mitigate the
environmental effects of freight transportation crossing the
Pyrenees
EURO-INFORMS Joint International
Conference 2013 in Rome, Italy
Rome, July 1-4, 2013
Fernando Lera-López
Department of Economics
Javier Faulín
Adrian Serrano
Department of Statistics and
Operations Research
Mercedes Sánchez
Department of Business
Administration
Public University of Navarre, SPAIN
Thank you for your attention!