On the Use of Contingent Valuation Figures in Cost Benefit Analysis for Environmental Change

This paper proposes a practicable ex post approach to control for income effects in Contingent Valuation studies to be used in environmental cost benefit analysis (CBA). Based on a simple general equilibrium model we derive theoretically welfare components that ought to enter CBA on environmental change. Contingent Valuation data on an Austrian Kalkalpen national park are being used to demonstrate how expected income changes influence people's willingness to pay figures. It is shown how expected income changes can be econometrically corrected for in Contingent Valuation to finally arrive at theoretically adequate environmental welfare measures.