Economic Valuation of Kol Wetlands

Binilkumar A.S.A. Ramanathan

Indian Institute of Technology Bombay,

Mumbai, India

A Conference on Ecosystem Services (ACES)

December 8-11, 2008

Naples, FL

2

Introduction

Wetlands – Most important ecosystems

Diverse goods and services

Negligence- Undervaluation-Degradation

Need for non-market valuation

Contingent Valuation Method

3

ObjectivesTo study the socio-economic dimensions of the stakeholders of the Kol wetland

To study the relationship between the socio-economic variables with the perception of stakeholders over the improved conservation of Kol wetland

To find out the determinants of willingness of pay of the stakeholders for the improved conservation of Kol wetland

To estimate the total economic value of Kol wetland in a contingent valuation framework.

4

Contingent Valuation Method

Most popular stated preference method

WTP/WTA : non-use/existence values

Gained popularity and legal validity after NOAA Panel report 1993

Open, single-bounded, Double-bounded, Double-bounded with follow up question

5

Focus Group Interviews

3 different areas and stakeholder groups

Major issues discussedDependencies/Benefits

Constraints/Conflicts

Perception on improvement

Willingness to pay

6

Study Area

Part of Largest Ramsar Site in India

Numerous Benefits(Paddy, Fish, Birds, Recreation, etc.)

Facing high rate of degradation (reclamation, sand mining, clay mining, unsustainable agri. practices)

7

Sample of the study

100 urban households – 50 divisions of Thrissur City Corporation

Stratified random sampling

Period of Survey: March to July 2007

8

Results and Discussion: Socio-economics

68.6%

28.9%2.6%

Category wise Classification of the Households

General CategoryOther Backward CommunityScheduled Castes

Majority of Population Belong to General category

0.0

20.0

40.0

60.0

80.0

Below 3 3-6 6-9 Above 9

25.4%

70.9%

3.1%

0.6%

Num

bero

fHou

seho

lds

Family Size(in Nos)

Distribution of Househods Based on the Family Size

Family Size varied between 1 and 14 with a mean of 4.5 and SD of 1.6

9

Results and Discussion: Socio-economics

100 % Literacy found among the decision maker of the households

13.4%

40.6%

10.3%6.0%

23.1%6.6%

Education wise classification of the households

Primary SecondaryHigher Secondary Technical DiplomaBachelors Post Graduation

14.0%

18.9%28.3%

2.3%1.4%

26.0%

5.1% 4.0%Occupation wise classification of the Hosueholds

Govt. Employee Private Employee PensionerFarmer Manual Labourer BusinessHousewife Others (incl Gulf)

Largest component in the Occupation pattern among the decision makers of the household found to be Pensionersfollowed by business

10

Results and Discussion: Socio-economics

Income varies between INR 14400-600000 with a mean of INR 139,608 and SD of INR 106,545. Majority of the households fall under the income category of INR 50000-10000

20.9%

25.4%19.7%

10.0%

10.9%6.3%

6.9%Income wise distribution of households (in INR)

Below 50000 50000-100000 10000-150000150000-200000 200000-250000 25000-300000Above 300000

11

Results and Discussion: Socio-economics

Scenic Beauty

1%

Water9%

Paddy Fields32%

All 58%

Selected features of Kol wetland by the Households Majority identified all four

attributes to be important and need to be conserved

High Interest

60%Moderate Interest

35%

No Interest5%

Interest-wise classification of the Households

95 per cent showed interest in the improved conservation of Kol wetland

12

Results and Discussion: Socio-economics

11.43

25.2435.71

17.626.67

3.33

1.61

19.35

29.84

25.8119.35

4.03

0.006.25

31.2531.25 25.00 6.25

0%10%20%30%40%50%60%70%80%90%

100%

Below 1 1-5 5-10 10-15 15-20 Above 20

Perc

enta

ge

Distance from Kol Wetland (in Kms)

Distance wise classification of the perception on wetland Improvement

No Interest Moderate Inerest High Interest

The Distance found to be an influencing factor in formulating perceptions among the stakeholders.

13

Results and Discussion: Socio-economicsAge-wise classification of perception of stakeholders on Wetland Improvement

*- Percentage of the horizontal total;**-Percentage of the vertical total

Interest for Wetland

ImprovementAge Group

Highly Interested

ModeratelyInterested

Not Interested Total

Below 40 Yrs 3(100.00)*(4.29)**

0(0.00)(0.00)

0(0.00)(0.00)

3(100.00)(3.00)

40-50 28(71.79)(40.00)

11 (28.21)(37.93)

0(0.00)(0.00)

39(100.00)(39.00)

50-60 23(74.19)(32.86)

8(25.81)(27.59)

0(0.00)(0.00)

31(100.00)(31.00)

60-70 10(52.63)(14.29)

9(47.37)(31.03)

0(0.00)(0.00)

19(100.00)(19.00)

70 and above 6(75.00)(8.57)

1 (12.50)(3.45)

1(12.50)(100.00)

8(100.00)(8.00)

Total 70(70.00)(100.00)

29(29.00)(100.00)

1(1.00)(100.00)

100(100.00)(100.00)

14

Results and Discussion: Socio-economicsEducation-wise classification of perception of stakeholders on Wetland

Improvement

*- Percentage of the horizontal total;**-Percentage of the vertical total

Interest for Wetland

ImprovementEducation

More Interested

ModeratelyInterested Not Interested Total

Primary 3(50.00)*(4.29)**

2(33.33)(6.90)

1(16.67)(10.00)

6(100.00)(6.00)

Secondary 24(66.67)(34.29)

12(33.33)(41.38)

0(0.00)(0.00)

36(100.00)(36.00)

Higher Secondary 8(53.33)(11.43)

7(46.67)(24.14)

0(0.00)(0.00)

15(100.00)(15.00)

Technical Diploma 7(87.50)(10.00)

1(12.50)(3.45)

0(0.00)(0.00)

8(100.00)(8.00)

Bachelors 19(82.61)(27.14)

4(17.39)(13.79)

0(0.00)(0.00)

23(100.00)(23.00)

Post Graduation 9(75.00)(12.86)

3(25.00)(10.34)

0(0.00)(0.00)

12(100.00)(12.00)

Total 70(70.00)(100.00)

29(29.00)(100.00)

1(1.00)(100.00)

100(100.00)(100.00)

15

Results and Discussion: Socio-economicsIncome-wise classification of perception of stakeholders on Wetland Improvement

*- Percentage of the horizontal total;**-Percentage of the vertical total

Interest for Wetland Improvement

Annual Income (in Rs)

More Interested ModeratelyInterested Not Interested Total

Below 50,000 7(63.64)*(10.00)**

4(36.36)(13.79)

0(0.00)(0.00)

11(100.00)(11.00)

50,000-100,000 9(47.37)(12.86)

9(47.37)(31.03)

1(5.26)(100.00)

19(100.00)(19.00)

100,000-150,000 16(69.57)(22.86)

7(30.43)(24.14)

0(0.00)(0.00)

23(100.00)(23.00)

150,000-200,000 9(81.82)(12.86)

2(18.18)(6.90)

0(0.00)(0.00)

11(100.00)(11.00)

200,000-250,000 11(68.75)(15.71)

5(31.25)(17.24)

0(0.00)(0.00)

16(100.00)(16.00)

250,000-300,000 6(100.00)(8.57)

0(0.00)(0.00)

0(0.00)(0.00)

6(100.00)(6.00)

Above 300,000 12(85.71)(17.14)

2(14.29)(6.90)

0(0.00)(0.00)

14(100.00)(14.00)

Total 70(70.00)(100.00)

29(29.00)(100.00)

1(1.00)(100.00)

100(100.00)(100.00)

16

Results and Discussion-CVM

The Elicitation format of WTP Question

XINR 100

2XINR 200

If Yes

If No

½ XINR 50

If Yes/No

If Yes/No

Maximum WTP

Source : adapted from Markandya et.al, 2002.

Double-bounded Dichotomous CVM model with a follow up Question of Maximum WTP

17

97%3%

The proportion of the stakeholders' on the basis of their willingness to pay

Willing to Pay Not Willing to Pay

0

20

40

60

zero 1-100100-200200-300300-500Above 500

3 622

46

22

1

Perc

enta

ge o

f Hou

seho

lds

Maximum WTP (in INR)

Classification of the Household Based on the maximum WTP

Majority of the household expressed their WTP for the improved conservation of Kol Wetland

WTP of majority of household ranged between INR 200-300

Results and Discussion-CVM

18

Results and Discussion: CVM

0 5 10 15 20 25

Below 50

50-100

100-150

150-200

200-250

250-300

Above 300

1

1

0

1

0

0

0

2

3

1

0

0

0

0

6

5

8

0

2

0

1

2

8

11

7

12

4

2

0

2

3

3

2

7

5

0

0

0

0

0

0

1

Percentage of Households

Annu

al In

come

(in

INR

('000

))

Income-wise classification of the Maximum WTP

0 1-100 100-200 200-300 300-500 Above 500

Positive relationship of WTP with Income

19

Determinants of WTP: A Regression Analysis

The linear forms of the equations are

MAXWTP= α+ β1 AGE + β2 EDULEVEL + β3 FAMSIZE + β4 ANNINCOME + β5 DISTKOL + β6 CONSINTEREST + β7 LOGLAND

MAXWTP= α+ β1 AGE + β2 EDULEVEL + β3 FAMSIZE + β4 LOGINCOME + β5 DISTKOL + β6 CONSINTEREST + β7 LOGLAND

Results and Discussion: CVM

20

Determinants of WTP: A Regression AnalysisSl No Variable Definition Exp. Sign

1 AGE The age of the decision maker of the household

+ve

2 EDULEVEL Education Level of the decision maker +ve

3 FAMSIZE Family size of the household +ve

4 ANNINCOME Annual income of the household +ve

5 DISTKOL Distance of the households from Kol Wetland

-ve

6 CONSINTEREST Conservation interest of the household(1- Not Interested, 2-Moderately interested, 3- Highly Interested

+ve

7 LOGLAND Logarithm of the total land holding of the household

-ve

8 LOGINCOME Logarithm of Annual income of the household

+ve

Results and Discussion: CVM

21

Determinants of WTP: Descriptive AnalysisSl No Variable Mean SD

1 AGE 53.44 9.84

2 EDULEVEL 4.42 1.59

3 FAMSIZE 4.5 1.2

4 ANNINCOME 171300 105772

5 DISTKOL 7.96 5.57

6 CONSINTEREST 1.31 0.49

7 LOGLAND 2.96 0.89

8 LOGINCOME 11.83 0.71

Results and Discussion: CVM

22

Determinants of WTP: A Regression Analysis

Model 1R2- .523 Adj R2-.487 F-14.270*

Variable Coefficients T value StandardizedCoefficients

Constant -311.596 -2.194**

AGE 2.786 1.999** .161

EDULEVEL 13.452 1.312 .125

FAMSIZE 13.693 1.232 .092

ANNINCOME .001 5.078* .470

DISTKOL -5.006 -2.088** -.163

CONSINTEREST 112.816 4.156* .321

LOGLAND -37.978 -2.553** -.197

Results and Discussion: CVM

23

Determinants of WTP: A Regression Analysis

Model 2R2- .503 Adj R2-.465 F-13.145*

Variable Coefficients t StandardizedCoefficients

Constant -1497.560 -5.530*

AGE 3.304 2.315** .191EDULEVEL 15.376 1.464 .143FAMSIZE 9.946 .857 .067

LOGINCOME 109.514 4.579* .454DISTKOL -4.535 -1.853*** -.148

CONSINTEREST 116.819 4.224* -.333

LOGLAND -42.598 -2.763* .221

Results and Discussion: CVM

24

Total Willingness to Pay

Mean WTP : INR 239.5 Median WTP = INR 200

SD WTP: INR 170.3

Total Population of Thrissur Municipal Corporation :317,526

Average Family size :4.5

Total Household: Population/Family size =317,526/4.5=70,563

Total WTP/Annum =Median WTP*Total HHs= 200*70,563

= INR 14,112,600/ Annum

Results and Discussion: CVM

25

Summary and Conclusions

The assessment of the interest of the stakeholders for the improved conservation of the wetland has shown that more than 95 per cent of the urban stakeholders are interested in improved conservation and management of their nearby wetland (Kol Wetland). It may be noted that 60 per cent of the stake holders are very highly interested.

The stakeholders are also willing to contribute a part of their income annually for the environmental, and thereby, the social cause of preservation of the wetland

26

Summary and ConclusionsThe socio economic features of the households , in general, influence the value perception of the stakeholders :

Annual income is found to have more significant and positive relationship with the maximum WTP

As expected the maximum WTP found to have an inverse relationship with the distance of the household from the wetland.

27

Summary and ConclusionsUsing the Contingent Valuation Method ,it is found

that the maximum WTP of the households varied

between 0 and INR 1,000 per annum with a mean of

INR 239.5 and a standard deviation of INR 170.3. The

median WTP was found to be INR 200. The majority

of the households is willing to contribute an amount

between INR 200 and 300. The total willingness to pay

for the improved conservation is estimated to be INR

14,112,600 per annum.

• Implications of the findings which are, however, theoretical, in nature:

• (i) Insignificance of educational level• (ii) Farmers’ perception & role• [ Based on these points, Government’s &

NGOs’ roles become important]

• (iii) Role of income, urbanization & Age• [Based on the point (iii), the theory of

environmental development in developing countries like India gets propounded} 28

29

Thank you