Contingent valuation studies are often characterized by a considerable number of protest responses, which may cause selectivity bias on the final estimates for WTP. Sample selection models can detect and – if necessary – correct selectivity bias. In economic applications where the relevant dependent variable is continuous, sample selection models are generally estimated using Heckman's 2-step method rather than the FIML estimator. Either method has its own drawback: computational complexity for the FIML method, susceptibility to collinearity problems for the 2-step method. Using data on valuation of forest resources for recreational use, we analyse the performance of the two estimators. In this application, given the presence of some collinearity, the FIML is preferred to the 2-step method. A procedure is outlined to deal with selectivity problems in similar settings.
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Strazzera, E., Genius, M., Scarpa, R. et al. The Effect of Protest Votes on the Estimates of WTP for Use Values of Recreational Sites. Environmental and Resource Economics 25, 461–476 (2003). https://doi.org/10.1023/A:1025098431440
- contingent valuation
- protest responses
- sample selection
- 2-step method