Are stated preferences convergent with revealed preferences? Empirical evidence from Nigeria

• Published in: Ecological economics Vol. 59; no. 1; pp. 24 - 37
• Main Authors: Urama, Kevin C., Hodge, Ian D.
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 05.08.2006; Elsevier
• Series: Ecological Economics
• Subjects: Contingent valuation; Ecosystem functions and environmental values; Ecosystems; Environment; Environmental economics; Nigeria; Revealed preferences; Stated preferences; Values; Nigeria; Ecosystem functions and environmental values; Revealed preferences; Contingent valuation
• ISSN: 0921-8009; 1474-7464; 1873-6106
• DOI: 10.1016/j.ecolecon.2005.09.022

The debate on the relevance of monetary valuation of environmental goods has often hinged around the convergence of stated and revealed preferences, and in turn the actual money choices of respondents. In this paper, we report two separate experiments conducted in southeastern Nigeria to compare irrigators' stated willingness to pay for a river basin restoration scheme designed to mitigate soil and water pollution problems in their farms with their actual expenditures to mitigate the same pollution problems. We found that the farmers' stated and revealed preferences were significantly correlated but yielded significantly different means at 5% level. While econometric analysis reveals a systematic association between key socioeconomic variables and farmers' stated WTP, lending credence to the CVM within its theoretical framework, analysis of the qualitative follow-ups reveals inconsistencies in some farmers' stated and revealed preferences that cannot be satisfactorily explained on the basis of economic theory alone. While individual utility maximisation was a dominant driver of both stated and revealed preferences for most farmers, lack of environmental awareness, information complexity, risk aversion and peer pressure were seen to limit the ability and willingness of the least educated segment of the sample to make apparently rational economic decisions in both markets. Overall, the results question the use of convergent and/or theoretical validity arguments for justifying and/or criticising the use of stated preference experiments in environmental policy.