TY - JOUR

T1 - Willingness to pay for a highland agricultural restriction policy to improve water quality in South Korea

T2 - Correcting anomalous preference in contingent valuation method

AU - Choi, Ik Chang

AU - Kim, Hyun No

AU - Shin, Hio Jung

AU - Tenhunen, John

AU - Nguyen, Trung Thanh

N1 - Funding Information: This study was carried out as part of the International Research Training Group TERRECO (GRK 1565/1) funded by the German Research Foundation (DFG) and the University of Bayreuth in the funding programme Open Access Publishing, Germany and the National Research Foundation of Korea (NRF), Korea.

PY - 2016/11/23

Y1 - 2016/11/23

N2 - This study examines the willingness to pay (WTP) for the highland agriculture restriction policy which aims to stabilize the water quality in the Han River basin, South Korea. To estimate the WTP, we use a double-bounded contingent valuation method and a random-effects interval-data regression. We extend contingent valuation studies by dealing with the potential preference anomalies (shift, anchoring, and inconsistent response effects). The result indicates that after the preference anomalies are corrected, the statistical precision of parameter estimates is improved. After correcting the potential preference anomalies, estimated welfare gains are on average South Korean currency (KRW) 2,861 per month per household. Based on the WTP estimate, the total benefits from the land use restriction policy are around KRW297.73 billion and the total costs are around KRW129.44 billion. The net benefit is, thus, around KRW168.29 billion. This study suggests several practical solutions that would be useful for the water management. First, a priority should be given to the valid compensation for the highland farmers' expected income loss. Second, it is necessary to increase in the unit cost of the highland purchase. Third, wasted or inefficiently used costs (e.g., overinvestment in waste treatment facilities, and temporary upstream community support) should be transferred to the program associated with high mountainous agriculture field purchase. Results of our analysis support South Korean legislators and land use policy makers with useful information for the approval and operationalization of the policy.

AB - This study examines the willingness to pay (WTP) for the highland agriculture restriction policy which aims to stabilize the water quality in the Han River basin, South Korea. To estimate the WTP, we use a double-bounded contingent valuation method and a random-effects interval-data regression. We extend contingent valuation studies by dealing with the potential preference anomalies (shift, anchoring, and inconsistent response effects). The result indicates that after the preference anomalies are corrected, the statistical precision of parameter estimates is improved. After correcting the potential preference anomalies, estimated welfare gains are on average South Korean currency (KRW) 2,861 per month per household. Based on the WTP estimate, the total benefits from the land use restriction policy are around KRW297.73 billion and the total costs are around KRW129.44 billion. The net benefit is, thus, around KRW168.29 billion. This study suggests several practical solutions that would be useful for the water management. First, a priority should be given to the valid compensation for the highland farmers' expected income loss. Second, it is necessary to increase in the unit cost of the highland purchase. Third, wasted or inefficiently used costs (e.g., overinvestment in waste treatment facilities, and temporary upstream community support) should be transferred to the program associated with high mountainous agriculture field purchase. Results of our analysis support South Korean legislators and land use policy makers with useful information for the approval and operationalization of the policy.

KW - Benefit-cost analysis

KW - Double-bounded contingent valuation method

KW - Potential preference anomalies

KW - Random-effects interval-data regression

KW - Willingness to pay

UR - http://www.scopus.com/inward/record.url?scp=85003475018&partnerID=8YFLogxK

U2 - 10.3390/w8110547

DO - 10.3390/w8110547

M3 - Article

AN - SCOPUS:85003475018

VL - 8

JO - Water (Switzerland)

JF - Water (Switzerland)

SN - 2073-4441

IS - 11

M1 - 547

ER -