Ecological Economics 58 (2006) 850 – 861

www.elsevier.com/locate/ecolecon

ANALYSIS

Analysing the social benefits of soil conservation measures using

stated preference methods
Sergio Colombo a,*, Javier Calatrava-Requena a, Nick Hanley b
a
Department of Agricultural Economics, Instituto Andaluz de Investigación Agraria (IFAPA), Andalucı́a Government,
Camino de Purchil s/n, 18004 Granada, Spain
b
Department of Economics, University of Stirling, Stirling FK94LA, Scotland, UK
Received 29 March 2005; received in revised form 13 September 2005; accepted 18 September 2005
Available online 2 November 2005

Abstract

The paper estimates the benefits of programmes to mitigate the off-site impacts of soil erosion for a watershed in Andalusia,
Spain. Two stated preference methods are used, namely choice experiments and contingent valuation, to obtain estimates of the
social benefit from soil erosion reductions under two different methodologies. We emphasise the relative merits of the choice
experiment method to provide useful inputs to policy design. However, employing both methods allows us to undertake a
convergent validity test and thus to provide more defensible social benefit estimates. The attributes used in the choice
experiment include water quality impacts (which we find to have the highest marginal values), impacts on wildlife and the
area subject to a control programme. The contingent valuation design includes an attempt to reduce bias by reminding
respondents about substitutes. Results are used to suggest upper limits on per hectare payments for soil conservation
programmes.
D 2005 Elsevier B.V. All rights reserved.

Keywords: Convergent validity test; Choice experiments; Contingent valuation; Soil erosion

1. Introduction employed in many olive groves, a cultivation style

Soil is a non-renewable resource which is indis-
pensable for life. In the south of Spain, soil erosion
rates are extremely high due to climatic conditions,
soil characteristics and the nature of tillage systems
* Corresponding author.
E-mail address: scolombo@ugr.es (S. Colombo).
0921-8009/$ - see front matter D 2005 Elsevier B.V. All rights reserved.
doi:10.1016/j.ecolecon.2005.09.010
that cause severe land degradation yet which occupies
most of the cultivated area of the eastern part of
Andalusia region (MAPA, 2000). One reason for
high soil erosion rates is the fact that all olive groves
are privately owned, and farmers are not rewarded by
the market for reducing soil erosion rates to the level
which society demands. This is for several reasons.
First, since the effects of soil erosion occur with a time
lag, farmers may not perceive these effects, or may
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
discount future losses more highly than society would
choose to. Third, many of the off-site impacts of soil
erosion have environmental effects which go un-
priced by markets. These off-site impacts include
deteriorations in water quality, desertification of the
landscape, and loss of wildlife habitat.
Rational responses on the part of government
require, from the economist’s viewpoint, information
on the costs of these environmental consequences, and
of peoples’ preferences for soil conservation pro-
grammes which reduce these costs. However, there
are relatively few studies worldwide on the economic
costs of the off-farm effects of soil erosion (Clark et al.,
1985; Feather et al., 1999, Hansen et al., 2002). In
Spain, some valuations of the off-farm effects of soil
erosion have been undertaken, for example ICONA
(1982), Almansa and Calatrava-Requena, 2002 and
Colombo et al., 2003. Almansa and Calatrava-Requena
(2002) studied a case specific to a reforestation project
in a small municipality of Almeria. The study of
Colombo et al. (2003) investigated the off-site effects
of soil erosion in the same watershed1 considered in
this study, but was based on a pilot study sample, and
did not include a choice experiment exercise.
This paper adds to this literature by comparing
estimates of the value of soil erosion control pro-
grammes obtained using contingent valuation (CV)
and choice experiments (CE), and by estimating
values for different attributes of soil conservation
plans using the latter technique. This is felt to be
particularly valuable in helping policy makers re-
design soil erosion control programmes which can
increase social benefits. Finally, we use our results
to suggest upper bounds on the per hectare pay-
ments that the government should offer to farmers
in the watershed. The rest of the paper is structured
as follows: a brief description of CV and CE under-
pinnings and a summary of the studies that have
carried out convergent validity tests using these
techniques is presented in Section 2. The question-
naire design is then presented in Section 3 and
results are shown in Section 4. Some conclusions
are offered in Section 5.
1
For a description of the watershed and the erosion rates in it, see
Colombo et al. (2003).
851
2. Methodological framework
Stated preference approaches rely on direct ques-
tioning of the affected population to estimate the
economic value, measured as either Willingness to
Pay or Willingness to Accept Compensation, for a
change in the level of supply of some environmental
good. The main difference between the two methods
used here is how they approach this problem. Con-
tingent Valuation takes a bwhole goodQ approach, and
asks WTP/WTAC for a discrete change in some
environmental good—such as water quality. Whilst
the nature of this change may be explained with
reference to the attributes of this good (such as eco-
logical quality, or pesticide levels), the method does
not estimate values for these individual attributes. In
contrast, the Choice Experiment method is based on
Lancaster’s characteristics theory of value (Lancaster,
1966). An environmental good is characterised as a
collection of attributes, and the levels these take.
Experiment design methods are then used to construct
choice tasks through which respondents reveal the
marginal values they place on each attribute. To
value a programme which changes the levels of
many of these attributes simultaneously–such as
with a soil erosion control programme–the compen-
sating surplus (WTP or WTAC) must be evaluated by
effectively summing over attribute values.
Since the underlying methodology of both CV and
CE is now well-known and widely discussed, we do
not present it here (see, for example, Bateman et al.,
2002). Rather, we briefly summarise how the existing
literature has compared the application of CV and CE
to the same environmental change, before explaining
how the CV and CE exercises were defined in our
study.
Previous authors have sought to compare CV and
CE estimates of the same underlying utility change as
a test of bconvergent validityQ (Mitchell and Carson,
1989). This test asks whether two valuation methods,
applied to the environmental change, produce signifi-
cantly different estimates of value. bPassingQ the con-
vergent validity test would mean a failure to reject the
null hypothesis of no significant difference between
the two estimates, and is seen by many as a useful
measure of the validity of stated preference estimates
(although, as Hanley and Spash pointed out many
years ago, both answers could be equally wrong:
852 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
Hanley and Spash, 1994). As Mitchell and Carson
themselves noted, b. . .neither measure (that is, neither
estimate) is assumed to be a truer measure of the
construct than the otherQ (p. 204).
In the literature there are actually rather few studies
that compare Willingness to Pay estimates derived
from CE and CV methods. Examples can be found
in Boxall et al. (1996), Hanley et al. (1998), Adamo-
wicz et al. (1998), Christie and Azevedo (2002) and
Lehtonen et al. (2003). Differences emerge in terms of
the relative magnitude of CE and CV estimates. For
instance, Boxall et al. (1996) and Adamowicz et al.
(1998) found that WTP estimated from the CV
method was higher than that obtained from CE. Han-
ley et al. (1998) and Christie and Azevedo (2002)
found a reverse relation, with CE welfare estimates
higher than the CV ones. Only Christie and Azevedo
(2002) and Lehtonen et al. (2003) report formal tests
for the statistical significance of these differences: in
the former paper, the authors concluded that they were
not able to support the equality hypothesis between
CV and CE value estimates, although a significant
difference was found in the latter study.
3. Study design
The main objective of the study was to identify
people’s preferences towards reducing the off-farm
effects of soil erosion in the Alto Genil watershed in
Andalusia. The questionnaire consisted of three parts.
The first part contained two questions aimed at elicit-
ing the relative importance that respondents attributed
to the environment with respect to other four areas of
public interest (education, health, crime, and cultural
heritage), and the relative importance that respon-
dents’ gave to the reduction of soil erosion among
three other areas of environmental concern (water, air
and biota). The information gathered in these ques-
tions was used in the CV exercise to reduce the effect
of budgetary substitutes bias, as noted below.
The second part of the survey contained the CV
and CE exercises (it is important to note that each
respondent was asked to complete both the CV and
CE tasks). The design of the CE exercise followed
several steps. At the beginning, through a wide bib-
liographic review of the agronomic, geological and
environmental literature, the main off-site effects of
soil erosion were identified. Subsequently, by means
of focus groups and informal interviews, we identified
the best subset of soil erosion effects to be used as CE
attributes. The attribute levels described the likely
future conditions with and without the implementation
of soil erosion reduction projects, and were selected
using the geographic information systems, experts’
advice and existing empirical studies. By means of
the geographic information system, we obtained a
detailed description of the areas in which the project
had to be implemented, and used this to predict
changes in attribute values. For instance, providing
experts with information regarding the number of
hectares that would be reforested and with which
trees or bush species, we predicted the expected den-
sity of flora and fauna with and without project execu-
tion. The number of jobs created was obtained by
relating the expected rise in agricultural production
due to soil erosion reduction (Pastor et al., 1999) to
the increase in farm work of olive collection, using the
formula of Lopez (1992). A particular effort was
dedicated in the definition of the monetary attribute
level, due to its central role in the welfare analysis. A
contingent valuation pilot study, details of which can
be seen in Colombo and Calatrava-Requena (2002),
allowed the definition of the mean value of the mone-
tary level and its range. The attributes and attribute
levels finally chosen are shown in Table 12. By the
inclusion of the barea of the project execution (km2)Q
attribute, we tested the hypothesis of sensitivity to
spatial scope in the CE estimates. A positive and
significant regression coefficient of this attribute
would indicate that respondents prefer a larger area
to be covered by the soil conservation plan, other
things being equal. Other attributes included land-
scape impacts, wildlife impacts, effects on water qua-
lity, and effects on rural employment.
This set of attributes and levels forms a universe of
1,062,153 possible combinations. By means of the
experimental design techniques (Louviere, 1988) an
orthogonal fraction of the complete factorial3 was
drawn, yielding 108 combinations to be presented to
2
The description of the attributes and attribute levels were pro-
vided with in much greater detail to respondents in a colour booklet.
3
108 profiles is the smallest orthogonal and balanced design that
allows the estimation of the 15 main effects plus the 90 two-way
attribute interactions (Louviere et al., 2000).
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861 853

Table 1 of 100 jobs and the area of project implementation

Attributes and attribute levels used in the study of 330 km2. This is one of the scenarios which we
Attributes Levels can simulate in the choice experiment. The refer-
Landscape change: desertification Degradation ence situation, which would result if no hypotheti-
of the semiarid areas Small improvement cal payment was forthcoming, was the status quo
Improvement
option as in the CE. The two stated preference
Surface and ground water quality Low
Medium methods were thus designed to be directly compar-
High able with each other in terms of valuing a given
Flora and fauna quality Poor policy scenario. The CV design followed the
Medium scheme used in Colombo et al. (2003). A bdouble
Good
stepQ process used to account for possible budgetary
Rise of agricultural productivity: 0
jobs created (number) 100 substitute bias was used. Respondents who stated a
200 positive WTP for the erosion process (WTP 1)
Area of project execution (km2) 330 were then asked to express a WTP for three pos-
660 sible environmental bsubstitute projectsQ in the
990
watershed. These were (I) reducing sewage pollu-
Extra tax (euros) 6.01
12.02 tion in their town, (II) reducing local urban air
18.03 pollution and (III) conserving local biodiversity. In
24.04 a second step, respondents were then informed
30.05 about their combined WTP (i.e. the sum of the
36.06
four WTP values, considered as an benvironmental
WTPQ). They were then reminded about their
responses earlier in the questionnaire to questions
respondents. Since it is unrealistic that a respondent concerning the importance that they assigned to
can complete 108 choice tasks and considering that environment issues in general relative to other
soil erosion might be an unfamiliar issue to respon- demands on public funds, and to soil erosion rela-
dents, we decided to present only four choice sets to tive to other environmental problems faced in the
each respondent. The 108 profiles were therefore split region. They were then asked to reconsider/restate
into 27 blocks, taking care to minimise both the the WTP for the four environmental projects (their
number of blocks and intra block correlation. The environmental WTP), and finally to reconsider/
status quo option described the expected environmen- restate their WTP value for the soil erosion project
tal situation in the watershed in 50 years if no soil (WTP 2).
conservation measures are implemented (Table 2). The third part of the questionnaire gathered socio-
Alternatives A and B represented the expected envir- economic information. The survey was administered
onmental situation in the watershed in 50 years with to 345 citizens selected so as to be representative of
different soil conservation measures. An example of the watershed population in terms of their residence
choice set is shown in Table 34.
In the CV exercise, respondents are asked to
state their maximum WTP to have, in 50 years
time, an environmental situation characterised by a Table 2
reduction of landscape desertification, a bmedium The status quo attributes and levels
qualityQ of the surface and ground waters, a Attributes Levels
bmedium quality of flora and faunaQ, the creation Landscape change: desertification Degradation
of the semiarid areas
Surface and ground water quality Low
Flora and fauna quality Poor
4
To reduce complexity at the choice stage and to avoid fatigue Agricultural productivity: job created (number) 0
effects, the description of the status quo option was dropped from Area of project execution (km2) 0
the choice set and provided to respondents on a separate sheet. Extra tax (euros) 0
854 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
Table 3
Example of choice set card presented to respondents
Situation A
Landscape change: desertification of Worsening
the semiarid areas
Surface and ground water quality Low
Flora and fauna quality Medium
Agricultural productivity: job created (number) 200
Area of project execution (km2) Two third
Extra tax (euros) 18.03
I choose situation A 5
municipality. The survey format was face to face
interviews.
4. Results
Of the 345 citizens who were interviewed, 19 did
not complete the questionnaire and were excluded from
the analysis, 74 expressed a protest answer and did not
respond to the CE cards; 51 displayed a zero WTP in
their CE response by choosing always the status quo
option. Some 201 persons thus fully completed the
survey, providing 1008 (252 * 4) valid observations
for choice model estimation, and (201 + 51) responses
for the CV analysis. Sample characteristics were com-
pared to the general Andalusian population character-
istics on the basis of the distribution of age, gender and
urban–rural area of residence, and were found to be
representative of the regional population.
4.1. Analysis of choice experiment data
In a random utility context, the probability that
individual n will choose option i over any other option
j belonging to the complete choice set C is given by:
 
Probin ¼ Prob Vin þ ein NVjn þ ejn 8jaC ð1Þ
where V is the deterministic component of utility, and e
is a random component. A typical assumption is that
this random component is independently and identi-
cally distributed (IID) with and extreme-value distribu-
tion5. Under this hypothesis an explicit form of the
5
This assumption leads to the IIA axiom (Louviere, 2000). If the
IIA property does not hold the analyst can use other models (nested
logit model, random parameters logit model, multinomial probit
model) that, despite a higher level of analytical complexity, relax
the IID assumption.
Situation B Status quo
Improvement Neither situation A nor situation B
is worth the extra tax payment.
High
High
100
All I choose the Status Quo option 5
24.04
I choose situation B 5
probability of choice of Eq. (3) is satisfied by the
conditional logit model (McFadden, 1973):
X  
Probin ¼ expðkVin Þ= exp kVjn 8jaC ð2Þ
j
where k is a scale parameter which is inversely pro-
portional to the standard deviation of the error terms
and Vin and V jn are conditional indirect utility func-
tions assumed to be linear in parameters,
X X  
Vjn ¼ Cj þ bjk Xjk þ cjn Sn TCj ð3Þ
where: C j is an alternative specific constant, X jk is the
k attribute value of the alternative j; b jk is the coeffi-
cient associated to the k attribute, S n is the socio-
economic characteristics vector of individual n and c jn
is the vector of the coefficients associated to the
individual socioeconomic characteristics6. Having
estimated these parameters, the marginal rate of sub-
stitution (MRS) between any pair of attributes a and b
can be calculated by the formula (4)
MRS ¼  ðbattribute a =battribute b Þ ð4Þ
In addition, willingness to pay measures relative to
different environmental scenarios can be obtained by
applying (5) where V 0 is the utility associated to the
binitial stateQ, V 1 is the utility associated to an
improved state encompassed in the study and b m is
the monetary attribute coefficient, interpreted as the
marginal utility of income.
Economic surplus ¼  1=bm ðV0  V1 Þ ð5Þ
We began by estimating a conditional logit
model: results are shown in Table 4. Model I
6
Since respondents’ characteristics do not vary across alterna-
tives, singularities arise in model estimation unless the socioeco-
nomic characteristics are introduced as interactions with either the
attributes or the alternative specific constants.
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861 855

Table 4
Choice model results
Model I Model II Model III
Coefficients Std. Coefficients Std. Coefficients Std.
error error error
Coefficients
Constant  2.899* 0.287  7.590* 0.681  9.821* 1.459
Landscape desertification: small improvement 0.939* 0.143 1.017* 0.148 1.527* 0.245
Landscape desertification: improvement 1.367* 0.142 1.516* 0.149 2.520* 0.288
Surface and ground water quality: medium 0.910* 0.154 1.052* 0.162 1.704* 0.281
Surface and ground water quality: high 1.348* 0.148 1.502* 0.155 2.349* 0.299
Flora and fauna quality: medium 0.656* 0.145 0.774* 0.152 1.179* 0.237
Flora and fauna quality: good 0.882* 0.141 1.049* 0.148 1.426* 0.250
Jobs created 0.006* 0.001 0.007* 0.001 0.010* 0.001
Degraded area treated 0.001* 0.0002 0.001* 0.0002 0.001 0.0004
Tax  0.046* 0.006  0.057* 0.007  0.108* 0.014
Constant * solidaritya 0.014* 0.005 0.025* 0.007
Constant * enjoymentb 0.016* 0.008 0.016 0.012
Constant * erosionc 0.003* 0.002 0.004** 0.002
Constant * genderd 0.039* 0.023 0.052 0.032
Constant * agee  0.072* 0.027  0.109* 0.039
Constant * marital statusf 0.063* 0.026 0.071** 0.037
Constant * occupationg 0.109* 0.026 0.199* 0.041
Constant * incomeh 0.00013* 0.00004 0.00018* 0.0001

Standard deviation
Landscape desertification: small improvement 0.832** 0.416
Landscape desertification: improvement 0.676 0.522
Surface and ground water quality: medium 0.830** 0.420
Surface and ground water quality: high 1.193* 0.375
Flora and fauna quality: medium 0.133 0.566
Flora and fauna quality: good 1.033** 0.431
Jobs created 0.009* 0.002
Degraded area treated 0.003* 0.0004
Number of observations 1008 1008 1008
Log likelihood at constant  1049.50  1049.50  1049.50
Log likelihood at convergence  912.70  821.945  755.397
LR 273.60 455.11 588.206
Pseudo R 2 130 258 318
a
Importance that respondents assigned to solidarity (likert scale 1–10).
b
Importance that respondents assigned to leisure activities in a natural environment (likert scale 1–10).
c
Percentage share of 1 public pound that respondents gave to the funding of soil erosion reduction projects among other natural resource care
projects (improve air, water and biodiversity quality).
d
Respondents’ gender (female: 0; male: 1).
e
Respondents’ age (less than 50: 0; more than 50: 1).
f
Respondents’ marital status (not married: 0; married: 1).
g
Respondents’ occupation (not active worker: 0; active worker: 1).
h
Respondents’ income.
* Significant at 1% confidence level.
** Significant at 5% confidence level.
856 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
represents the regression coefficients of an attri-
butes-only7 conditional logit model; whilst model II
includes socioeconomic and attitudinal characteristics
of respondents8. The significance of the regression
coefficients in model II implies that it is the preferred
model to be used for welfare estimation. Model II is
highly significant (LRTest = 455.11, significant at the
0.000 level), and when tested for the IIA assumption
passed the Hausmann and McFadden (1984) test with
a v 2 value of 10.60 ( p = 0.91).
All regression coefficients are significant at the 1%
level. The signs of all the utility function parameters
are theoretically consistent. In all cases, the highest
attribute level has associated with it the highest utility.
The three qualitative environmental attribute coeffi-
cients (landscape desertification, surface and ground
water quality and flora and fauna quality) suggest
increasing utility as respondents are offered better
environmental conditions. The coefficients of these
qualitative environmental attributes are calculated
from dummy variables: they reflect the relative utility
with respect to the status quo situation. So, in the case
of the landscape desertification, the coefficient of the
bmediumQ improvement level represents the average
change in the utility that respondents experience in
going from the worse level (reference) to the medium
improvement level. The differences between the med-
ium and the high levels of the qualitative attributes
were also checked fitting the model with the medium
level of each attribute used as reference. Again, the
difference between the attribute’ levels were found to
be significant at a 1% confidence level, except for
flora and fauna quality where the difference between
the medium and the highest level were found to be
significant at the 5% confidence level. The signifi-
cance of the social attribute (jobs created) reveals that
respondents care about employment: this is not sur-
prising considering that there are a lot of seasonal
workers in the Andalusia region whose incomes
depend on the collection of olives, almonds and vege-
7
The inclusion of the second order interactions, although permit-
ting a better fit, did not provide significant changes in the regression
coefficients of attributes or in the welfare measures.
8
Initially all the socioeconomic characteristics gathered in the
survey were considered in the model. Subsequently, the non-sig-
nificant ones at 10% level were dropped from the model.
tables. It is interesting that the coefficient representing
the area included in the project (the number of square
kilometres of the watershed in which will be imple-
mented in the soil erosion reduction project) is sig-
nificant, showing that a scope effect is present in the
data.
The negative sign of the constant reveals the pre-
sence of a status quo bias, i.e. the utility associated
with moving away from the current situation is nega-
tive and significant. As Adamowicz et al. (1998)
pointed out status quo bias is a common economic
phenomenon that may happen because respondents
(1) find the task of selecting the preferred option too
complex; (2) they are uncertain about the trade-off
they would be willing to make; and (3) do not trust the
government to actually implement any of the soil
erosion control projects. Soil erosion is a rather tech-
nical issue about which people are often unfamiliar.
The rather small amount of information given in the
survey may have been insufficient for some respon-
dents to feel comfortable to make a positive choice
about the design of soil erosion control policy, whilst
the status quo offered an easy opt-out.
The socioeconomic interactions with the constant
show that people who assigned higher importance to
community solidarity, or who enjoy activities closely
related with the natural environment, have a greater
probability of choosing either alternative A or B.
People who allocated a higher share of the public
budget to reducing soil erosion among the other
three areas of environmental care (water, air and
biota) were also more likely to chose options A or
B rather than the status quo. Residents older than 50
years were more likely to choose the no change
option relative to younger people. Marital status
and occupation influences choice of the preferred
alternative as well, in the sense that married and
active worker people are the groups that have a
greater probability of choosing either alternative A
or B. The income coefficient shows that the higher
the income the higher the probability of opting for
soil erosion control.
Including socioeconomic characteristics as in
model II is also one way of incorporating preference
heterogeneity in the model. A further step to include
respondents’ heterogeneity is to use the random para-
meters logit model (Train, 1998). In this approach, the
utility function described in (3) is augmented with a
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861 857

Table 5
Implicit prices and confidence intervals
Model IIa Model IIIa
Implicit price (o) Implicit price (o)
Attribute coefficients
Landscape desertification: small improvement 17.78 (12.02; 25.21) 14.09 (9.67; 19.87)
Landscape desertification: improvement 26.51 (20.05; 35.76) 23.25 (18.53; 29.79)
Surface and ground water quality: medium 18.39 (12.67; 25.96) 15.72 (11.03; 21.47)
Surface and ground water quality: high 26.27 (20.10; 34.67) 21.67 (17.02; 27.26)
Flora and fauna quality: medium 13.53 (7.96; 19.54) 10.87 (6.87; 15.56)
Flora and fauna quality: good 18.34 (13.11; 24.57) 13.16 (8.86; 18.26)
Jobs created 0.119 (0.088; 0.160) 0.089 (0.065; 0.123)
Degraded area treated 0.014 (0.007; 0.023) 0.005 ( 0.004; 0.013)
a
95% Confidence interval in parenthesis.

vector of parameters g that incorporate individual’s
preference deviations with respect to the mean pre-
ference values expressed by the vector b:
X X X   attitudinal variables, enjoyment and gender are no
Vjn ¼ Cj þ bjk Xjk þ gnk Xjk þ cjn Sn TCj
ð6Þ
where g is a vector of deviation parameters which
represents the individual’s tastes relative to the
average (b) and the other terms are as previously
defined. The researcher can estimate b and g; the
g nk terms, as they represent personal tastes, are
assumed constant for a given individual across all
the choices they make, but not constant across
people. This implies that IIA is not a property of
the RPL model. In order to estimate the model it is
necessary to make an assumption over how the b
coefficients are distributed over the population:
Train (1998) assumes them to be distributed either
log-normally or normally.
Model III (Table 4) gives results from this random
parameter set-up. By incorporating heterogeneity the
model fitting rises significantly. The attributes-only
model has a pseudo-rho square (q 2) of 0.13; by add-
ing the socioeconomic and taste characteristics the q 2
rises to 0.258, and, in the random parameter logit
model it assumes a value of 0.3189. In the RPL
9
Simulations conducted by Domenich and McFadden (1975)
compare values of q 2 between 0.2 and 0.4 to values between 0.7
and 0.9 of the R 2 in the case of the ordinary linear regression.
model, mean effects are very similar to those of
model II, with the exception that the parameter esti-
mate for the degraded area of project execution is no
longer significant. Among the socioeconomic and
longer significant determinants of choice. Coefficient
values of model III are consistently bigger than those
of model II. This reflects the fact that in the RPL
model the variance in parameters is treated explicitly
as a separate component of the error (g nk , X jk ) such
that the remaining error (e nj ) is free of this variance.
This does not happen in the conditional logit model,
where the error term encompasses all the variance not
explained by the model itself.
The standard deviation terms in the random
parameter model are significant for six attributes,
suggesting that preferences do indeed vary among
respondents. Their magnitudes are reasonable relative
to the mean coefficient values, the exception being
for the job attribute and especially for the degraded
area attribute, where the standard deviation is three
times the mean attribute value. This high heterogene-
ity could explain the big difference between the impli-
cit price of the degraded area treated attribute in model
II and model III.
Table 5 shows the implicit prices for all the attri-
butes considered. Overall, the confidence intervals of
the implicit prices overlap considerably, so that, at
least in this case, allowing for heterogeneous prefer-
ences makes little difference to welfare estimates.
These implicit prices for all the attributes are positive,
implying that respondents have a positive WTP for
increases in the quality or quantity of each attribute. In
858 S. Colombo et al. / Ecological Economics 58 (2006) 850–861

Table 6 of the medium level, that the implicit prices of moving

Compensating surplus for three possible scenarios from a medium to a high improvement are around 1/2
Scenarios Model IIa Model IIIa of those expressed to move from the low to the
Compensating Compensating medium level.
surplus (o) surplus (o) Using the choice model parameters, it is also pos-
Scenario 1 10.77 14.56 sible to obtain compensating surplus estimates for a
(16.87; 4.37) (19.40; 9.67) wide range of policy scenarios. As an example, the
Scenario 2 36.11 34.20
following three scenarios have been used to illustrate
(43.75; 29.75) (40.69; 28.57)
Scenario 3 53.48 44.03 the overall willingness to pay for improvements with
(62.33; 45.68) (51.53; 36.81) respect to the status quo conditions in the environ-
a
95% Confidence interval in parenthesis. mental and social quality of the watershed.

Scenario 1: Landscape desertification is charac-

case of quantitative attributes, the implicit prices
represent the WTP to achieve one unit more (one
more job, one more square kilometre) of the attribute
considered. If the attributes are qualitative, the impli-
cit prices reflect the WTP for a discrete change in the
attribute level, for example to change from the blowQ
to the bmediumQ level of surface and ground water
quality. The implicit prices afford some understanding
of the relative importance of the attributes and can be
used by policy makers to assign more resources in
favour of the attributes which have higher implicit
prices. For models II and III, the reduction of land-
scape desertification is the effect that produces the
highest marginal impact on WTP, followed by the
improvement of water quality to a bhighQ level. Note-
worthy is that, according to the economic principle of
decreasing marginal utility, the marginal WTP for the
environmental attributes decreases as one moves
toward higher attribute levels. In Table 5 it is possible
to observe, by subtracting the marginal WTP asso-
ciated with the highest level from the marginal WTP
terised by a small improvement; water quality is
improved to a medium level; flora and fauna qual-
ity is improved to medium; jobs created are 100
and the watershed degraded area treated is equal to
330 km2. This scenario corresponds to that used in
the CV exercise.
Scenario 2: Landscape desertification is charac-
terised by a larger improvement; water quality is
high; flora and fauna quality is improved to a
medium level; jobs created are 200 and the
watershed degraded area treated is equal to 660
km2.
Scenario 3: Landscape desertification is charac-
terised by a larger improvement; water quality is
high; flora and fauna quality is good; jobs created
are 200 and the watershed degraded area treated is
equal to 990 km2.
Estimated compensating surplus (willingness to pay)
and 95% confidence intervals for the three scenarios
described above are calculated by means of Eq. (5)

Table 7
Mean and median WTP before and after the iterative process
Statistics WTP 1 WTP 2
WTP for the erosion project WTP for all projects WTP for the erosion project WTP for all projects
Mean 26.58 76.46 16.18 41.06
Median 12.02 30.05 6.01 24.04
Standard deviation 38.24 124.93 25.07 52.12
95% Confidence intervals 21.86–31.30 61.03–91.89 13.08–19.28 34.62–47.50

Null hypothesis for medians WTP 1 = medians WTP 2 v2 Prob. value of accepting null
Erosion control project 7.773 0.000
All environmental projects 8.152 0.000
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
Table 8
Comparison between CV and CE mean estimates
Statistics CV estimate
WTP erosion project
Mean 16.18
95% Confidence interval (13.08; 19.28)
Poe et al. (1997) testa CV-CE(model II)
CV-CE(model III)
a
H0: WTP CV = WTP CE; H1: WTP CV N WTP CE.
and are shown in Table 610. Estimated compensating
surplus for the change from the status quo to the
scenarios are consistent across the range of policy op-
tions used in this study and as expected, WTP in-
creases as we move towards better environmental and
social conditions in the watershed. For example, sce-
nario 2 compared to scenario 1 presents a lower land-
scape desertification, a higher water quality, 100 more
jobs and 330 km2 of degraded area treated more. All
these changes bring an increase of 25.34 o in the
case of model II and 19.64 o in the case of model III
in the average respondent’s WTP. Allowing for pre-
ference heterogeneity does not appear to influence
significantly the compensating surplus estimates, and
there is no clear pattern of differences in magnitude
between model II and model III estimates. What
is observable is that the RPL estimates are more sta-
tistically precise than the conditional logit model
estimates.
4.2. The contingent valuation exercise
Basic statistics for positive CV WTP bids are shown
in the second column of Table 7. Some 11% of the
sample stated a genuine zero answer; whilst the per-
centage of protest bidders was 23%. Mean and median
WTP for the erosion project before considering the
substitute projects were 26.58 o and 12.02 o,
whereas after considering these substitutes, WTP fell
to 16.18 o and 6.01 o respectively. The statistics for
benvironmental WTPQ, i.e. referring to WTP for all four
environmental projects (air, water, soil and biodiver-
sity), show the same trend, decreasing from 76.46 o
10
In the estimation, the socioeconomic characteristics were set at
the population mean level.
859
CE (model II) CE (model III)
WTP Scenario 1 WTP Scenario 1
10.77 14.56
(4.37; 16.87) (9.67; 19.40)
95% Confidence interval of the difference (o) Sign
1.37, 12.77 0.065
18.13, 6.71 0.177
and 30.05 o to 41.06 o and 24.04 o. There exists a
significant difference (a z 0.01) between these two
measures as indicated by the Wilcoxon matched-pair
signed-rank test. This reveals the presence of an em-
bedding effect in the WTP estimates before we asked
respondents to consider the substitute projects. This
result underlines the importance of considering in CV
questionnaires a specific ddexerciseTT to deal with the
embedding problem to reduce the risk of biased esti-
mates. The omission of the double step procedure in
our case would have led to an over-estimation of WTP
for the soil erosion project of 64%.
4.3. A convergent validity test
In this study, the significance of the difference
between the two sets of stated preference estimates
were tested following the convolution test proposed
by Poe et al. (1997) in which we took a series of 1000
random draws from the asymptotic distribution of the
parameters. The results of the comparison of CV and
CE estimates in terms of estimated WTP are shown in
Table 811. In the case of model II there is rather weak
evidence to support the convergent validity of the CV
and CE exercises, since the mean WTP from the CE
exercise lies outside the 95% confidence interval of
the CV WTP mean. The Poe et al. (1997) approach
suggests that the CV and CE mean do not differ at
95% confidence levels, but only permits a weak,
borderline acceptance of mean equality. This is not
the case of model III, where the null hypothesis of
mean equality test can be more strongly accepted. So,
11
For comparability, 1000 draws of the open-ended WTP welfare
measure were also simulated from the mean and standard error of
the sample distribution, assuming normality.
860 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
Table 9
CV and CE aggregate WTP
CV CEscenario 1 CEscenario 2 CEscenario
Aggregate 4,691,275
WTP (o)
Model II 3,123,766 10,466,305 15,502,583
Model III 4,222,522 9,915,053 12,765,068
Per hectare 142.15
value
(o ha1)
Model II 94.66 158.58 156.59
Model III 127.95 150.22 128.94
allowing for taste heterogeneity using the random
parameter approach seems to aid convergent validity.
These individual welfare estimates can be aggre-
gated to determine the WTP of the population to deter-
mine the social value of the soil erosion off-farm effects
in the watershed12. Table 9 shows the aggregate WTP
for the CV method and for the CE for the three
scenarios considered. Depending on the magnitude
of the improvement of the environmental and social
conditions in the watershed that can be achieved by
the implementation of the soil erosion reduction pro-
ject, the social benefits of reducing soil erosion are
between 3.1 and 15.5 million euros per year.
5. Conclusions
Soil erosion produces both on-site and off-site
impacts, which particularly in the Mediterranean
regions of Europe are serious enough to warrant policy
action. However, to ensure costs are not bexcessiveQ
relative to benefits, and to aid the optimal design of soil
conservation policy, policy makers need information
on public preferences for this policy intervention.
12
The watershed population is 375,002 people. In the aggregation
we added the people who state a bprotestQ answer (the 22.7% of the
population) considering them as they would have expressed a zero
WTP, as recommended by the NOAA panel (Arrow, 1993). By
including protest answers as zero WTP and by considering only the
people living in the watershed, the aggregate WTP values shown are
under-estimates of total economic value for the reductions in soil
erosion impacts, because (1) people that expressed a bprotestQ
answer might have a positive value on reducing soil erosion and
(2) people living outside the catchments (especially downstream)
might well derive utility from these improvements, i.e. have a
positive WTP.
We found that both CE and CV were suitable to
evaluate the off-site effects of soil erosion. We also
3 found that the welfare estimates did not differ markedly
between the two approaches. In the CV method, we
employed a means of reducing bias by reminding
respondents of substitute environmental goods: this
proved to have a large effect on stated WTP. The CV
method gave estimates of the benefits of a pre-defined
package of potential improvements from a soil conser-
vation strategy. In contrast, the CE approach allowed us
to assign economic values to different attributes of
strategy that policy-makers can fine-tune. Water quality
and landscape benefits were valued highly relative to
wildlife and employment benefits. However, a status
quo bias was detected that may suggest that the choice
task proved difficult for some respondents.
Individual WTP for the reduction of the external
effects of soil erosion extend over the 11–53 o inter-
val, depending on the magnitude of the environmental
and social improvement achieved with project imple-
mentation, and the area of project execution. By aggre-
gating this value to the population we estimate that the
social value of reducing the off-farm effects of soil
erosion in the catchment lie in the 3.1–15.5 million o
interval, i.e. about 95–160 o per hectare. The per-
hectare welfare estimates obtained in this study span
the current subsidy that the Andalusia’s Government
gives to farmers that adopt soil conservation measures
(132.22 o ha 1 year 1). Thus, public administration
is currently paying a subsidy to farmers that is in
consonance with what society is willing to pay.
Another way of thinking about this is to say that
payments above o160 per hectare might lead to nega-
tive net social benefits—although recall that we have
not included benefits to visitors and non-residents in
our study. However, it is not clear that even very high
payments would lead benoughQ farmers to adopt soil
conservation strategies to achieve the kinds of benefits
included in Scenario 3. This is not only because the
opportunity costs per hectare might exceed this value
in some parts of the region, but also because the lack of
up-take of soil conservation adoption measures is not
only due to financial issues13 but also to social, cul-
tural and institutional matters. Further research is
13
The average costs of implementing and maintaining the soil
erosion reduction systems hypothesised in this paper are actually
not that much greater than the costs of traditional tillage system.
 S. Colombo et al. / Ecological Economics 58 (2006) 850–861
needed in these fields to fully understand the reasons
that bring farmers to the decisions on adopting soil
conservation measures.
Acknowledgements
The authors would like to thank the Spanish Minis-
terio de Agricultura, Pesca y Alimentación (Project
INIA RTA01-128), and the Consejerı́a de Agricultura
y Pesca of the Andalucian Government (Project, PIA
8.01-01) for financial support. We are grateful to Pro-
fessor Jordan Louviere for his assistance in the devel-
opment of the experimental design used in this study.
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