About Benefit Transfer
The Benefit Transfer (BT) concept
In many cases, policy analysts cannot afford the design and implementation of original valuation studies, given the high costs required. Further, some countries have limited experience in performing primary valuation studies. For such cases, the BT technique might be the preferred valuation method. The BT method refers to the application of the results obtained from a particular case to another area. The site of the original research is usually called “study site”, while the site to which the benefit estimate is transferred is called “policy site”. This process is a cost-effective way to evaluate the environmental effects of projects when original research is not possible. In any case, primary research is the “first-best” strategy, especially in cases where a high degree of precision is critical.
Benefit Transfer techniques
There are two broad approaches to benefit transfer: (a) value transfer and (b) function transfer. Value transfers encompass the transfer of a single (point) estimate from a study site, or a measure of central tendency of the estimates from several study sites (such as an average value). Function transfers encompass the transfer of a benefit or demand function from a study site, or a meta regression analysis function derived from several study sites. Function transfers then adapt the function to fit the specifics of the policy site such as socioeconomic characteristics, extent of market and environmental impact, and other measurable characteristics that systematically differ between the study site(s) and the policy site.
Conditions, reliability and validity of BT
Several necessary conditions should be met to perform effective and efficient benefit transfers, for example: studies transferred must be based on adequate data, sound economic method, and correct empirical technique, the environmental resource and the change in the quality (or quantity) should be similar between the “study site” and the “policy site”, the similarity of demographic characteristics between the two populations and their cultural aspects should be considered, etc.
In addition, several factors may affect the reliability and validity of the method, such as the quality of the original study, the restricting the pool of estimates and studies from which to draw information, the limitation of documentation of data collected and reported, the different research methods that may have been used for data collection, as well as the different statistical methods that may have been applied for estimating models, etc.
Recent studies have tested the validity and reliability of different benefit transfer methods. In some tests, produced tailored values were very similar to the true values (as low as a few percentage points difference). In other cases, however, the disparity between the true value and the tailored value was quite large. In general, it is established that benefit transfer cannot replace original research, especially when the costs of being wrong are high, e.g. in the case of liability issues.
Bibliography on BT issues
Adamowicz, W., Louviere, J. and Williams, M., 1994. Combining revealed and stated preference methods for valuing environmental amenities. Journal of Environmental Economics and Management 26:271-292.
Barton, D., 1999. The Quick, the Cheap and the Dirty Benefit Transfer Approaches to the Non-market Valuation of Coastal Water Quality in Costa Rica. Doctor Scientiarum Theses 1999:34, Department of Economics and Social Sciences, Agricultural University of Norway.
Bergstrom, J.C. and De Civita, P., 1999. Status of Benefits Transfer in the United States and Canada: A Review, Canadian Journal of Agricultural Economics 47, pp. 79-87.
Boyle, K. J. and Bergstrom, J. C., 1992. Benefit transfer studies: myths, pragmatism and idealism, Water Resources Res. 28(3), pp. 657-663.
Brouwer, R. and F. A. Spaninks, 1999. The Validity of Environmental Benefit Transfer: Further Empirical Testing, Environmental and Resource Economics, 14, pp. 95-117.
Desvousges, W.H., Johnson, F.R. and Banzhaf, H., 1998. Environmental policy analysis with limited information: Principles and applications of the transfer method. Massachusetts: Edward Elgar.
Downing, M., Ozuna Jr., T., 1996. Testing the reliability of the benefit function transfer approach. Journal of Environmental Economics and Management. 30(3), pp. 316-322.
Garrod, G. and Willis, K., 1999, Benefit Transfer, in Economic Valuation of the Environment: Methods and Case Studies, Edward Elgar Publishing Limited, Cheltenham, UK.
Kirchhoff, S., Colby, B.G. and LaFrance, J.F., 1997, Evaluation the Performance of Benefit Transfer: An Empirical Inquiry, Journal of Environmental Economics and Management, 33, pp. 75-93.
Kristofersson, D. and Navrud, S., 2001. Validity Tests of Benefit Transfer: Are We Performing the Wrong Tests?, Discussion Paper D-13/2001, Department of Economics and Social Sciences, Agricultural University of Norway.
Leon, C.J., Vazquez-Polo, F.J., Guerra, N. and Riera, P., 2002, A Bayesian Model for Benefits Transfer: Application to National Parks in Spain, Applied Economics, 34, pp. 749-757.
Loomis, J., Roach, B., Ward, F. and Ready, R., 1995. Testing the transferability of recreation demand models across regions: A study of Corps of Engineers reservoirs. Water Resources Research. 31(3), pp. 721-730.
Lovett, A.A., Brainard, J.S. and Bateman, I.J., 1997, Improving Benefit Transfer Demand Functions: A GIS Approach, Journal of Environmental Management, 51, pp. 373-389.
Pattanayak, S., Wing, J., Depro, M., Van Houtven, G., De Civita, P., Stieb, D. and Hubbell, B., 2002. International health benefits transfer application tool: the use of PPP and inflation indices. Final report, prepared for Economic Analysis and Evaluation Division, Office of Policy Coordination and Economic Analysis Policy and Planning Directorate, Healthy Environments and Consumer Safety Branch, Health Canada.
Ready, R., Navrud, S., Day, B., Dubourg, R., Machado, F., Mourato, S., Spanninks F. and Vazquez, R., 2004. Benefits Transfer in Europe: Are Values Consistent Across Countries?, Environmental and Resource Economics, Volume 29, Number 1, pp. 67 - 82.
Rosenberger, R., Loomis, S. and John, B., 2001. Benefit transfer of outdoor recreation use values: A technical document supporting the Forest Service Strategic Plan, (2000 revision). Gen. Tech. Rep. RMRS-GTR-72. Fort Collins, CO: U.S. Department of Agriculture, Forest Service, Rocky Mountain Research Station.
Rosenberger, R.S. and Loomis, J.B., 2000. Panel stratification in meta-analysis of environmental and natural resource economic studies. Journal of Agricultural and Applied Economics. 32(3), pp. 459-470.