Hostname: page-component-8448b6f56d-jr42d Total loading time: 0 Render date: 2024-04-18T07:02:50.348Z Has data issue: false hasContentIssue false
  • English
  • Français

Economic valuation of flood risk exposure and reduction in a severely flood prone developing country

Published online by Cambridge University Press:  01 June 2009

ROY BROUWER ,
SONIA AKTER ,
LUKE BRANDER  and
ENAMUL HAQUE
ROY BROUWER*
Affiliation:
Institute for Environmental Studies (IVM), Vrije Universiteit, De Boelelaan 1087, 1081 HV, Amsterdam, The Netherlands. Tel.: +31 20 5985608. Email: roy.brouwer@ivm.vu.nl
SONIA AKTER
Affiliation:
North–South University, Department of Economics, Dhaka, Bangladesh
LUKE BRANDER
Affiliation:
Institute for Environmental Studies (IVM), Vrije Universiteit, Amsterdam, The Netherlands
ENAMUL HAQUE
Affiliation:
Economic Research Group, Dhaka, Bangladesh
*
*Corresponding author.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper presents the results of a dichotomous choice contingent valuation (CV) study of reduced flood risks in Bangladesh. Sensitivity of willingness to pay (WTP) to varying risk exposure levels is tested in a ‘natural experiment’, targeting floodplain residents facing regular annual flooding and a disaster flood once every five to ten years. Accounting for price, income and education levels, both subjective risk aversion and objective baseline risk exposure affect stated WTP for a common level of flood protection. We find a number of problems with the CV application in this specific developing country context. Half of the respondents are unable to pay in financial terms, but are willing to contribute in kind. The combined use of a monetary and non-monetary measure of WTP would have lowered the number of zero bids considerably. A test-retest carried out six months after the original survey shows that the stated WTP values are reliable.

Type
Research Article
Information
Environment and Development Economics , Volume 14 , Issue 3 , June 2009 , pp. 397 - 417
Copyright
Copyright © Cambridge University Press 2008

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

ADB (1990), ‘Project completion report of the Meghna-Dhonagoda Irrigation Project in Bangladesh’, Asian Development Bank Report PCR: BAN 21177.Google Scholar
Bangladesh Bureau of Statistics (2005), ‘Statistical pocketbook of Bangladesh 2003’, Bangladesh Bureau of Statistics, Dhaka.Google Scholar
Bateman, I.J., Langford, I.H., Turner, R.K., Willis, K.G., and Garrod, G.D. (1995), ‘Elicitation and truncation effects in contingent valuation studies’, Ecological Economics 12: 161–179.Google Scholar
Beattie, J., Covey, J., Dolan, P., Hopkins, L., Jones-Lee, M., Loomes, G., Pidgeon, N., Robinson, A., and Spencer, A. (1998), ‘On the contingent valuation of safety and the safety of contingent valuation: Part 1 – Caveat investigator’, Journal of Risk and Uncertainty 17: 5–25.Google Scholar
Bin, O. and Polasky, S. (2004), ‘Effects of flood hazards on property values: evidence before and after hurricane Floyd’, Land Economics 80: 490–500.Google Scholar
Brouwer, R., Akter, S., Brander, L., and Haque, E. (2007), ‘Socio-economic vulnerability and adaptation to environmental risk: a case study of climate change and flooding in Bangladesh’, Risk Analysis 27: 313–326.Google Scholar
Brouwer, R. and Bateman, I.J. (2005), ‘The temporal stability and transferability of models of willingness to pay for flood control and wetland conservation’, Water Resources Research 41: W03017.Google Scholar
Brouwer, R., Langford, I.H., Bateman, I.J., and Turner, R.K. (1999), ‘A meta-analysis of wetland contingent valuation studies’, Regional Environmental Change 1: 47–57.Google Scholar
Carthy, T., Chilton, S., Covey, J., Hopkins, L., Jones-Lee, M., Loomes, G., Pidgeon, N., and Spencer, A. (1999), ‘On the contingent valuation of safety and the safety of contingent valuation: part 2 – the CV/SG chained approach’, Journal of Risk and Uncertainty 17: 187–213.CrossRefGoogle Scholar
Centre for Policy Dialogue (2004), Interim Report 1-1 Rapid Assessment of Flood 2004, Dhaka, August 2004.Google Scholar
Daniel, V.E., Florax, R.J.G.M., and Rietveld, P. (2005), ‘River flooding and housing values: an economic assessment of environmental risk’, 45th Meeting of the European Regional Science Association. Amsterdam.Google Scholar
Daun, M.C. (2000), ‘Flood risk and contingent valuation willingness to pay studies: a methodological review and applied analysis’, Technical report #6, Institute for Urban Environmental Risk Management, Marquette University, Milwaukee, WI, USA.Google Scholar
Efron, B. and Tibshirani, R.J. (1993), An Introduction to the Bootstrap, New York: Chapman & Hall.CrossRefGoogle Scholar
Ganderton, P.T., Brookshire, D.S., McKee, M., Stewart, S., and Thurston, H. (2000), ‘Buying insurance for disaster-type risks: experimental evidence’, Journal of Risk and Uncertainty 10: 271–289.Google Scholar
Georgiou, S., Whittington, D., Pearce, D.W., and Moran, D. (1997), Economic Values and the Environment in the Developing World, Cheltenham, UK: Edward Elgar.Google Scholar
Haab, T.C. and McConnell, K.E. (1997), ‘Referendum models and negative willingness to pay: alternative solutions’, Journal of Environmental Economics and Management 32: 251–270.Google Scholar
Hanemann, W.M. (1984), ‘Welfare evaluations in contingent valuation experiments with discrete responses’, American Journal of Agricultural Economics 66: 332–341.Google Scholar
Johansson, P.-O. (1995), Evaluating Health Risks. An Economic Approach, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Jones-Lee, M. and Loomes, G. (1997), ‘Valuing health and safety: some economic and psychological issues’, in Nau, R., Gronn, E., Machina, M. and Bergland, O. (eds), Economic and Environmental Risk and Uncertainty: New Models and Methods, Dordrecht: Kluwer Academic Press, pp. 3–32.CrossRefGoogle Scholar
Kristofersson, D. and Navrud, S. (2005), ‘Validity tests of benefits transfer – are we performing the wrong tests?’, Environmental and Resource Economics 30: 279–286.Google Scholar
Kunij, O., Nakamura, S., Abdur, R., and Wakai, S. (2002), ‘The impact on health and risk factors of the diarrhoea epidemics in the 1998 Bangladesh floods’, Public Health 116: 68–74.Google Scholar
MacDonald, D.N., White, H.L., Taube, P.M., and Huth, W.L. (1990), ‘Flood hazard pricing and insurance premium differentials: evidence from the housing market’, The Journal of Risk and Insurance 57: 654–663.CrossRefGoogle Scholar
McConnell, K.E., Strand, I.E., and Valdes, S. (1998), ‘Testing temporal reliability and carry-over effect: the role of correlated responses in test-retest reliability studies’, Environmental and Resource Economics 12: 357–374.CrossRefGoogle Scholar
NEDECO (1993), ‘Flood Action Plan Bangladesh: Evaluation Report 1993’, Netherlands Development Cooperation, The Hague.Google Scholar
Pearce, D.W. and Smale, R. (2005), ‘Appraising flood control investments in the UK’, in Brouwer, R. and Pearce, D.W. (eds), Cost–benefit Analysis and Water Resources Management, Cheltenham: Edward Elgar.Google Scholar
Rasid, H. (2000), ‘Reducing vulnerability to flood disasters in Bangladesh: compatibility of floodplain residents’ preferences for flood alleviation measures with indigenous adjustments to floods’, in Parke, D.J. (ed.), Floods, Volume II, London: Routledge, pp. 46–65.Google Scholar
Rasid, H. and Haider, W. (2003), ‘Floodplain residents’ preferences for water level management options in flood control projects in Bangladesh’, Natural Hazards 28: 101–129.Google Scholar
Rasid, H. and Mallik, A. (1995), ‘Flood adaptations in Bangladesh: is the compartmentalization technique compatible with indigenous adjustments of rice cropping to flood regimes?’, Applied Geography 15: 3–7.Google Scholar
Rasid, H. and Paul, B. K. (1987), ‘Flood problems in Bangladesh: is there an indigenous solution?’, Journal of Environmental Management 11: 155–173.Google Scholar
Rosenzweig, M.R. and Wolpin, K.I. (2000), ‘“Natural experiments” in economics’, Journal of Economic Literature 38: 827–874.Google Scholar
Shabman, L. and Stephenson, K. (1996), ‘Searching for the correct benefit estimate: empirical evidence for an alternative perspective’, Land Economics 72: 433–449.Google Scholar
Shogren, J. and Crocker, T. (1991), ‘Risk, self-protection, and ex ante valuation’, Journal of Environmental Economics and Management 20: 1–15.CrossRefGoogle Scholar
Smith, V.K. (1992), ‘Environmental risk perception and valuation: conventional versus prospective reference theory’, in Bromley, D.W. and Segerson, K. (eds), The Social Response to Environmental Risk, Boston: Kluwer.Google Scholar
Tversky, A., Sattath, S., and Slovic, P. (1988), ‘Contingent weighting in judgement and choice’, Psychological Review 95: 371–384.Google Scholar
Viscusi, W.K. (1989), ‘Prospective reference theory: toward an explanation of the paradoxes’, Journal of Risk and Uncertainty 2: 235–264.CrossRefGoogle Scholar
Whittington, D. (1998), ‘Administering contingent valuation surveys in developing countries’, World Development 26: 21–30.CrossRefGoogle Scholar
Whittington, D., Smith, V.K., Okorafor, A., Okore, A., Long Liu, J., and McPhail, A. (1992), ‘Giving respondents time to think in contingent valuation studies: a developing country application’, Journal of Environmental Economics and Management 22: 205–225.CrossRefGoogle Scholar