Can money always talk? Implication for environmental compensation by international agribusiness

Discussion Papers


by Li ZHOU and Lei Lei

April 2017


With the development of agricultural industrialization, the environmental issues of intensive animal farming are attracting increasing attention. Using survey data from 313 Chinese households living near the large-scale broiler farms of an international food company, this paper employs a contingent valuation method and discrete choice experiment to quantify the willingness to accept an air pollution compensation scheme. We find the following. (1) 42% of respondents have a nonmonetary preference for compensation; thus, the conventional contingent valuation method is unsuitable for application to them. (2) The results of a probit and tobit model show that in addition to income, “trust and perception” dominate decision-making based on willingness to accept; however, the effect of actual distance is weak. (3) Because of the positive externalities of roads, schools, and job opportunities, the combination of nonmonetary options is feasible and beneficial for both sides (the company and households) in the long term. Thus, from the perspective of the global value chain, it is worth studying nonmonetary compensation strategies in order to explore the sustainable development strategies of multinational corporations.

Keywords: willingness to accept; CVM; choice experiment; global value chain; pollution; China
JEL classification: F23, Q12, Q51

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