Households’ willingness to pay for the rehabilitation of wetlands: evidence from Gudera Wetland, Northwest Ethiopia

Abstract

Gudera wetland is accredited as a home for innumerable goods and services that have economic value for individuals living around and outside them. However, due to the absence of rehabilitation intervention, the wetland is at the edge of collapse at this time. This paper aims to: (1) estimate households' mean willingness to pay (WTP) for the rehabilitation of the wetland, (2) investigate determinants that affect the probability and intensity of WTP, and (3) estimate aggregated welfare gains from the intervention. To address these objectives, data from 237 household heads were collected using a two-stage random sampling procedure. For the analysis, econometric models, such as bivariate probit and double hurdle, were employed to estimate the mean WTP and determinants of WTP, respectively. The result demonstrates that the mean WTP value from the double bounded dichotomous choice ranges from 70.44 to 80.64 Ethiopian Birr per year per household. Likewise, the aggregated welfare gain expected from the rehabilitation intervention ranges from 2,464,977 ($85,589) to 2,821,916 ($97,983) Ethiopian Birr per year. The double hurdle model result revealed that participation in natural resource conservation, frequency of extension contact and trust in budget allocation have a positive and significant effect on households' WTP. Whereas, factors, such as land size around the wetland, distance to the wetland and credit utilization have a negative influence on households’ WTP. These findings suggest that most of the sampled households are willing to contribute for the rehabilitation intervention and this could have implications for the success of future implementation.

Keywords

• Bivariate probit
• Contingent valuation
• Dichotomous choice
• Double hurdle model
• Hypothetical market scenario
• Welfare gain