| This dissertation applies the Contingent Valuation Method (CVM) for evaluating the household willingness to pay (WTP) for a flood control project in the Iguacu Basin in Rio de Janeiro, Brazil.;The analysis is based on data obtained from the Iguacu Project of the Federal University of Rio de Janeiro on the socio-demographic characteristics and flooding experience of residents to estimate their WTP for the project. Several binomial logit models estimate, using the maximum likelihood method, the impact of the resident's socio-demographic attributes and flooding experience on their WTP. While interpreting these results, this study introduces the concept of Relative Economic Sacrifice (RES) which measures the proportion of income the household is asked to pay in the predominant dichotomous choice referendum format used to collect the WTP data. Analysis of four RES groups reveals the weakness of applying this currently preferred format in poor communities as it systematically biases the RES distribution among the different income groups. The concept of Entitlement Construct is introduced to capture the culturally determined expectations of citizens with respect to services, such as flood protection, to be a public rather than a market good.;Examination of the theoretical validity and empirical realism of the CVM, when applied to a flood control project in a low income area of a developing country metropolis, indicates the following: (a) sixty-two percent of the respondents are unwilling to pay; (b) most of the theoretically expected covariates of WTP are statistically significant; (c) contrary to economic theory, homeowners with a final deed are significantly less willing to pay for the project; (d) there is evidence of overpledging by the lowest income group. Finally, five attributes---uncertainty, novelty, intagibility, the institutional setting and the entitlements assumed by the households---significantly reduce the content validity of the standard CVM questions as applied to a flood control project in a developing country, and thus undermine its value in establishing policy. |
