Rural Households’ Willingness to Pay for Improving Environmental Quality in China: A Double-Hurdle Approach

Abstract

Introduction and hypothesis Economic growth and welfare increase motivate people’s willingness to improve environmental quality including rural residents in China. Rural households have been active in implementing Rural Revitalization Strategy promoted as a national development initiative since 2017. Along with the urbanization strategy, the new initiative will direct and dominate rural development for the coming decades with immense policy and financial support from both central and provincial governments (Wang and Zhuo, 2018). Implementation and effectiveness of government policies have been limited, and participatory approaches have been promoted focusing on self-governance of communities and stakeholders. In addition to the policy and financial support, rural households can greatly increase the success of the national rural development initiative with their active participation and investment. While government finance typically focuses on municipal infrastructures, individual households may be willing to invest in improving surrounding environments including trash disposal, sewerage treatment, greening, etc. Moreover, the willingness to pay (WTP) for environmental quality may be affected by people’s awareness of and attitude to environmental quality problems. While most previous literature have documented WTP for ecosystem services, the WTP for environmental quality improvement is still understudied, in particular, from the perspective of Chinese rural households. The primary objective of this study is to investigate the WTP of rural households for improving living environment and examine effects of influential factors on WTP using a double-hurdle model accounting for heteroscedasticity concerning separate decisions. We used a conceptual model to link awareness of environmental problems with rural households’ WTP for improving environmental quality. Households’ WTP decisions can be associated with factors in four categories: 1) household characteristics, 2) living conditions and health status, 3) attitudes to environmental problems, and 4) information sources. Based on the literature, the following variables were hypothesized to affect WTP decisions: age (−), higher education (+), household size (+), senior or youth (+), higher household income (+), higher household expenditure (−), adopting sustainable farming practices (+), satisfaction and happiness with current living conditions (+), better health status (+), better air quality (−), better housing condition (+), poor awareness of environmental protection (+), pesticide and fertilizers causing environmental problems (+), and more information from government, TV, internet, and neighbors (+). Data and methods We used data from a rural households survey conducted in December 2018. The data were collected from Fujian, Henan, and Sichuan provinces, representing eastern, middle, and western regions of China. The questionnaire includes detailed information on individual and household-level characteristics, agricultural production and marketing, household members’ health and living conditions, attitude to air quality change, living environment change, housing condition change, awareness of environmental problems, decisions and willingness to pay for environmental quality improvement, information sources, etc. The survey focused on rural households with agricultural production, while excluding city residents, because we are more interested in how rural households make decisions to complement the national initiative for rural development. We employed a double-hurdle model to account for the separate decision making of rural households. Two steps were considered: an individual decides whether to pay for environmental improvement and the amount of payment he/she would like to make. The command churdle exponential in Stata software allowed us to jointly estimate a participation decision (Yes=1, No=0) with a payment decision (continuous variable) with the het option to account for selection variance. Marginal effects were estimated and interpreted for each of the independent variables. Results Among the 820 respondents, about 61% would like to pay for environmental improvement with an average payment of 261 yuan (7 yuan ≈ 1 USD). Regarding the participation, people who are more happy with current living, having better health status, better environment condition, aware of poor environmental planning, and living in eastern region are more likely to participate in the public investment in environmental improvements. People who have better education, higher household income, better health condition, more information from government and internet are more likely to pay more for the environmental improvement