Elicitation format effects on welfare estimates of riparian habitat protection in Kenya

Abstract

Despite the values associated with riparian habitats (RH), in Nairobi County these habitats are under pressure from human activities such as: - urban farming, informal settlements and dumping of solid wastes. Recently, the Kenyan National Environmental Management Authority (NEMA) demolished structures along RH to promote their health. The intervention could be rational with economic and environmental implications on RH protection, but empirical evidence is lacking. Therefore, understanding welfare effects associated with change in Elicitation Formats (EF) could explain the observed behavior. Multistage sampling procedure was used to sample 774 households. Stochastic Payment Card (SPC) and Multiple Bound Discrete Choice Payment Card (MBDC) generated the data. Data were: - collected through interview schedule, analyzed using Two Stage Random Valuation model and processed with STATA. MBDC willingness to pay (WTP) seemed inconsistent even though it was 1.26 times that of SPC. At 1% significance level, a statistical difference in mean WTP values was observed between the SPC and MBDC data, leading to rejection of null hypothesis in favor of the alternative (There’s a significant difference in mean WTP value between SPC and MBDC formats). Determinants (Age, Gender, Income, Distance, Necessity to protect and Land ownership) significantly influenced WTP across the three models. Standard deviations of WTP distributions were significantly influenced by (Distance, Age, Gender, Household size, Certainty of future incomes, Necessity to protect and Land ownership). The Kenyan residents were willing to pay positive amounts towards RHP. SPC valuation format was most preferred for valuation of RHP since it led to underestimation of RHP in Kenya. Change in EF positively influenced welfare estimates at 1% significance level leading to the rejection of the overall null hypothesis (Changing the EF does not significantly affect individual welfare estimates towards RHP in Kenya). Therefore, city authorities can now use the mean and SD estimates to benchmark their budget and policy proposals for RHP, with adjustments for individual WTP uncertainties, socio-economic and other characteristics of individuals, given they have proved to be important drives of welfare estimate decisions. Valuation estimates can now be used to formulate policies for restoration and protection of RH in Kenya and beyond to enhance their functioning. Moreover, more comparative studies can be done on valuation of other environmental goods and services with change in in EF as a variable.