Environmental and Resource Economics

, Volume 70, Issue 1, pp 169–190 | Cite as

Preference Heterogeneity in the Structural Estimation of Efficient Pigovian Incentives for Insecticide Spraying to Reduce Malaria

  • Zachary S. Brown
  • Randall A. Kramer


This paper bridges the theoretical and empirical literatures on the role of preference heterogeneity in characterizing externalities related to disease transmission. We use a theoretical structure similar to locational sorting models, which characterize equilibria in terms of marginal individuals who are indifferent between locations. In our case, the ‘locations’ are binary, consisting of whether or not to take a discrete preventative action. Individual heterogeneity arises in this structure due to variation in the costs and disutility associated with prevention. We demonstrate application of this approach in the context of participation in insecticide-based indoor residual spraying programs for malaria control in northern Uganda. We identify the parameters of our theoretical model using a stated preference choice experiment combined with estimates from published epidemiological studies. The model implies that Pigovian subsidies for participation in this context should decrease household malaria risk by 19–25%. Our approach can be applied to other bioeconomic externalities with spillovers from discrete preventative actions, including agricultural pest management and the control of pest infestations and invasive species.


Discrete choice models Preference heterogeneity Externalities Pigovian incentives Malaria Insecticides Locational sorting models 

JEL Classification

D62 H23 Q56 Q58 O13 O15 

Supplementary material

10640_2017_115_MOESM1_ESM.pdf (1.1 mb)
Supplementary material 1 (pdf 1095 KB)


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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.Department of Agricultural and Resource Economics and Genetic Engineering and Society CenterNorth Carolina State UniversityRaleighUSA
  2. 2.Nicholas School of the Environment and Duke Global Health InstituteDuke UniversityDurhamUSA

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