Benefit Transfer Approaches

The benefit transfer method relies on secondary data, and is used to estimate nonmarket economic values by transferring available information from original studies already completed. The source(s) of the available economic information is typically referred to as the “study site,” and the context that this information is used in is referred to as the “policy site.” There are two main approaches to benefit transfer: value transfer and function transfer. In a value transfer, a single point estimate, range of multiple point estimates, or measure of central tendency from multiple point estimates (e.g., an average value), is transferred from the original study site(s) where primary research was conducted, to a policy site with similar characteristics that is being evaluated. In a function transfer, a statistical function based on the existing literature is used to implement the transfer of a benefit measure. Function transfers can be based on a benefit or demand function from a single study in the existing literature, or on a meta-regression function, which summarizes the value estimates reported in multiple studies in a statistical function. The function is adapted to match the characteristics of the policy site that is being evaluated, and then used to forecast a nonmarket value estimate for the policy site.

Criteria for a Valid Transfer

As outlined by Boyle and Bergstrom (1992), there are three main criteria to follow for a valid benefit transfer:

  1. The nonmarket commodity valued at the study site and policy site are identical;
  2. The populations affected by the nonmarket commodity at the study and policy sites have identical characteristics; and
  3. The assignment of property rights at both sites must lead to the same theoretically appropriate welfare measures (e.g., willingness to pay).
These should be viewed as ideal criteria that can be difficult to meet, especially if there are a limited number of existing nonmarket valuation studies. However, the closer the analyst comes to meeting these criteria, the more valid the benefit transfer will be. When using this Toolkit for benefit transfers, users are encouraged to read the relevant literature on this topic. For a detailed description of benefit transfer approaches, see Rosenberger and Loomis (2003). A 2006 special issue of the journal Ecological Economics was dedicated to the topic of benefit transfer (Wilson and Hoehn, 2006); Rosenberger and Stanley (2006) provide a very useful discussion of the various sources of error in benefit transfers. While benefit transfer is a “second-best” approach, it can provide a practical alternative to nonmarket valuation when primary research is not feasible due to time or budget constraints.

Point Estimate Transfer

The databases of studies accessed from the Home page of the Toolkit can be used to determine whether an existing study can be located that matches the characteristics of the policy site being evaluated (e.g., recreation activity, species, geographic location). If a match is found, the user can transfer the point estimate of economic benefits, adjusted for inflation if necessary, from that study to the policy site. It should be noted that while the databases provided in the Toolkit can help analysts identify existing nonmarket value estimates, they should still be viewed as a starting point. Once a study is identified as a possible source for the benefit transfer, the user is strongly encouraged to review the original study to determine whether it provides a close enough match to the context being evaluated.

Average Value Transfer

If the user cannot find a close match between the geographic location of the existing studies in the Toolkit and the policy site, an average value for the relevant geographic region may be used, referred to as an average value transfer. When transferring a regional average value, the user should consider the number of observations used to generate that estimate. In searching the databases in the Toolkit, the user may find multiple studies conducted in the county or state of interest. In this case, the user may want to create their own average value based on this subset of studies.

Meta-Regression Function Transfer

If Toolkit users cannot find an existing study that matches their policy site, and cannot identify or estimate an average value that would be representative, another option is to conduct a benefit function transfer based on a meta-regression model. These statistical functions analyze the relationship between the economic value estimate and various study and resource specific attributes based on the full dataset of studies valuing a particular resource. When the user clicks on one of these functions (available at the right hand side of this page), they are taken to a calculator-type tool which prompts them to select resource and site attributes to match the characteristics of the resource that is being valued. A measure of consumer surplus is then forecasted based on these user defined characteristics.

References

Boyle, K.J., and Bergstrom, J.C. 1992. Benefit transfer studies: myths, pragmatism, and idealism. Water Resources Research 28(3), 675–683.

Rosenberger, R. and Loomis, J. 2003. Benefit transfer, in Champ, P.A., Boyle, K.J., Brown, T.C. (Eds.), A primer on nonmarket valuation. Boston, Kluwer Academic Publishers, p. 395-444.

Rosenberger, R.S., and Loomis, J.B. 2001. Benefit transfer of outdoor recreation use studies: A technical document supporting the Forest Service Strategic Plan (2000 revision). General Technical Report RMRS-GTR-72,
USDA Forest Service, Rocky Mountain Research Station, Fort Collins, CO.

Rosenberger, R.S., and Stanley, T.D., 2006. Measurement, generalization, and publication: sources of error in benefit transfers and their management. Ecological Economics 60(2), 372–378.

Wilson, M.A., and Hoehn, J.P. 2006. Environmental benefits transfer: methods, applications and new directions benefits transfer special issue. Ecological Economics 60(2), 335-482.