Is the valuation of water quality sensitive to external shocks? Evidence from political instability in Croatia.
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This paper examines the short run sensitivity of willingness to pay (WTP) estimates for
groundwater quality and quantity in the presence of external shocks, using data from two
choice experiments implemented in Zagreb, Croatia. To assess the sensitivity of WTP
estimates we take advantage of a sudden deterioration in political stability, expressed by a
series of public protests that took place in the city during the data collection and compare
mean WTP estimates before and during the protests. We find that mean WTP for
groundwater quality and quantity is sensitive to the occurrence of the protest. The result
indicates that events unrelated to environmental quality and especially political instability
can influence the valuation of environmental goods. We interpret the result as an
indication that the choice experiment method is sensitive enough to capture changes in
WTP that are a result of sudden changes in the state of the world.