Calculating Marginal and Non-marginal Welfare Measures

Abstract

This chapter focuses on the calculation of marginal and non-marginal welfare measures. It outlines how the calculation of welfare measures is related to the specified model and the assumptions underlying that model. It further describes how the calculation of these measures is affected by the inclusion of preference heterogeneity, including the incorporation of interaction terms to capture observed preference heterogeneity or random parameters to capture unobserved preference heterogeneity. Finally, it discusses how these measures can be aggregated and compared.

Willingness to Pay for Environmental Conservation: Subsidy Reduction as a Payment Vehicle

“…The welfare measure in the form of willingness to pay can be determined by estimating the marginal rate of the substitution between the attributes (Mariel et al 2021). The WTP for a change in an alternative as measured in a specific non-price attribute can be expressed by:…”