Contingent valuation of ambient air quality in Malta : the effect of proximity to pollution. information and time - preferences

Abstract

The aim of this dissertation is to quantify individual willingness-to-pay (WTP) for increased air quality in Malta by means of the Contingent Valuation Method (CVM). The thesis examines the implications of information provision, proximity to a pollution source, and time-preference among other determinants of WTP. This dissertation draws from literature in the field of environmental and behavioural economics pertaining to the CVM including that which explores the effect that time-preferences may have on WTP for future benefits, and the effect that provision/framing of information may have on WTP for present benefits. Few studies have focused on these environmental economic issues within the context of ambient air quality. The thesis employs primary data collected by means of survey questionnaires, involving more than one treatment. Analysis is conducted using both the Ordinary Least Squares method and Binary Choice methods making use of the Probit and Logit models. This analysis finds that economic agents are willing to pay for improvements in ambient air quality (on average Euro 109 as a one-time surcharge in water and electricity bills). It also finds that proximity to a pollution source has significant positive effect on willingness-to-pay. Whilst providing information to respondents did not significantly affect willingness to pay, delaying benefits of policy to the future resulted in a significant reduction in WTP. Indeed, economic agents seem also to discount future benefits hyperbolically rather than exponentially. This also provides a useful insight on time-preferences by inferring the discount rate function based both on information and proximity from respondents' WTP contributions.