Estimating the Willingness to Pay for a Flood Control Project in Brazil Using the Contingent Valuation Method

Abstract

Contingent valuation has become one of the dominant methods for valuing nonmarketed environmental goods, as well as for damage assessment due to natural hazards. In this study, the method is applied for evaluating the household willingness to pay for a flood control project in an impoverished periphery of Rio de Janeiro, Brazil. Theoretical validity is analyzed via a binary logistic regression, which describes the impact of sociodemographic, dwelling characteristics, and flood related variables on the willingness to pay for the project. Analysis of content validity indicates a series of characteristics—uncertainty, novelty, lack of well-differentiated values, institutional setting, and entitlement structure—which appear to drastically limit the use of contingent valuation for flood control projects in low income areas of developing countries. The study concludes that the method, in it’s current formulation, is not appropriate for use in policy decisions about flood control investments in areas described by a concentration of low income households in developing countries.