Conference Agenda

Environmental challenges require well-informed policy action. While a comprehensive understanding of benefits, costs, and fiscal externalities resulting from a policy is ideal, policymakers often lack resources for primary valuation studies and transfer benefit estimates from existing contexts to policy sites. Widely-used benefits transfer techniques often rely on the strong, and empirically questionable, assumption that the income elasticity of willingness to pay is one. We allow for flexible income elasticities across sites and derive a transfer function with an adjustment factor that additionally depends on differences in income, environmental goods, and prices. Using a CES utility framework and data on eutrophication reduction in Finland and Estonia, we show that transfer factors vary from 0.175 to 0.767 depending on elasticity assumptions. Applying our method to tree cover valuation across seven US cities using FEMA cost- benefit guidance, we find that alternative elasticity assumptions η = 1 (Income only matters for benefits transfer), η = 0 (environmental good level only matters), and heterogeneous city-level η produce large shifts in the magnitude and rank order of WTP across cities. Our findings suggest that accounting for heterogeneous η across space and time can have important implications for policy siting, implementation, and efficacy.