Relating environmental attitudes and contingent values: how robust are methods for identifying preference heterogeneity

• Published in: Environmental & resource economics Vol. 37; no. 4; pp. 757 - 775
• Main Authors: Aldrich, Gwendolyn A, Grimsrud, Kristine M, Thacher, Jennifer A, Kotchen, Matthew J
• Format: Journal Article
• Language: English
• Published: Dordrecht Dordrecht : Kluwer Academic Publishers 01-08-2007; European Association of Environmental and Resource Economists; Springer Nature B.V
• Series: Environmental & Resource Economics
• Subjects: Attitudes; Behavior; Cluster analysis; Contingent valuation; Econometrics; Economics; Endangered & extinct species; Endangered species; Environmental attitudes; Environmental economics; Estimates; Estimation; Heterogeneity; Latent class analysis; Mathematical models; New Ecological Paradigm; Polls & surveys; Preferences; Statistical analysis; Studies; Unobservable heterogeneity; Validation studies; Validity; Valuation; Variables; Willingness to pay
• ISSN: 0924-6460; 1573-1502
• DOI: 10.1007/s10640-006-9054-7

We assess the importance and robustness of cluster analysis and latent class analysis as methods to account for unobserved heterogeneity. We provide a critique and comparison of both methods in the context of measuring environmental attitudes and a contingent valuation study involving endangered species. We find strong evidence of robustness for these methods: group characterization and assignment of individuals to groups are similar between methods, and willingness-to-pay estimates are consistent. In addition, there are significant differences in willingness-to-pay across environmental attitudinal groups, and we find that accounting for unobservable heterogeneity provides a significantly better fitting model.