JOURNAL OF NATURAL RESOURCES ›› 2013, Vol. 28 ›› Issue (6): 1007-1018.

### Using Spike Model to Evaluate the Effect of Zero Responseon Welfare Measurement—Evidence from the Willingness to Pay for the Ecological Compensation of the Yangtze River Basin in Nanjing Section

DU Li-yong1,2, CAI Zhi-jian1,3, YANG Jia-meng1, JIANG Zhan1

1. 1. College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China;
2. Department of Management, Jiangyin Polytechnic College, Wuxi 214400, China;
3. Research Center of Ecological Economics, Key Research Base of Philosophy and Social Sciences in Jiangsu Province, Nanjing 210037, China
• Received:2012-06-26 Revised:2012-11-13 Online:2013-06-20 Published:2013-06-20

Abstract:

In contingent valuation surveys, data is often complicated by zero willingness to pay (WTP) responses in the sample. Without properly dealing with, zero responses would deeply reduce the reliability and validity of welfare valuation. Based on a case study on the WTP for ecological compensation of the Yangtze River Basin in Nanjing city, 1403 individual questionnaires in closed-ended double bounded dichotomous choice format were collected. Given conventional methods dealing with zero responses will result in estimation bias in terms of WTP, special attention was paid to the issue of zero response in the survey, and a Spike model that allows for a non-zero probability of zero response was applied. Because different types of zero responses have different economic implications, without distinguishing between true zero response and protest responses will result in non-neglecting measure bias. The conventional methods to deal with zero response have been known as dropping it from the analysis, or substituting it with either zero or a near zero positive number. When dropping zero responses, it yielded a WTP between 359 and 396 yuan per household per year. While replacing zero responses with a near zero positive number, it yielded a WTP between 154 and 208 yuan per household per year. However, dropping zero responses will run the risk of sample selection bias, while replacing it with near zero number seems somewhat too subjective. Thus, a Spike model that allows for a non-zero probability of zero WTP in referendum-style was brought into practice. It includes many of the often used models as special cases and allows various analyses that are not possible in standard applications. Under the Spike model, the zero response samples were further divided into protest response and true zero response according to their behind motivations. Then the value of WTP was estimated between 259 and 288 yuan per household per year, which is significantly smaller than the dropping method but larger than the replacing method. The total compensation value paid by Nanjing households was at least 24.4×108 yuan in the following five years. It was also found that there were obvious differences in the determinations of decision-making between the willing to join step and willing to pay steps. Environmental services are luxury, and only when people's income reaches a certain level will they buy them. Thus at the practical level, considering the heterogeneous acceptability and burden of expenditure, special attention needs to be paid to the low-income families.

CLC Number:

• F062.2