The Economics of Desertification, Land Degradation, and Drought

from nature. Economists are continuously improving methodologies to address this issue. At this time,
we suggest relying on the TEV and classifications of ecosystem services and benefits, such as that
presented in Balmford et al. (2008), in order to avoid the double-counting issue.
Valuation Techniques for the Costs and Benefits of Ecosystem Services
A wide range of valuation approaches can be used to assess the value of natural resources. 41 The main
ones are reviewed in Table 3.1.
Table 3.1—Main valuation techniques
Methodology Approach Limitations
Market price People’s actual WTP Missing or distorted markets
Production function–based Economic contribution of
Relationship between change in
approaches/Productivity change ecosystems to production of goods ecosystem services and production
and services
level
Travel cost Spending to access ecosystem sites Limited to recreational benefits
Hedonic pricing Difference in prices (of property,
wage) due to existence or level of
ecosystem services
Replacement costs Costs of replacing ecosystem
services and goods
Mitigative or avertive behavior Costs of mitigating or averting the
loss of ecosystem good or service
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Information on ecosystem services
may not be transparent; distorted
markets
Assumption that artificial
replacement is equivalent
Prone to overestimation
Damage cost avoided Avoided costs of land degradation Avoided costs may not be equal to
benefits of ecosystem services
Contingent valuation The amount people are willing to
pay or to accept
Choice experiment Choice of a preferred option from a
set of alternatives with particular
attributes—usually, one is price
Benefit transfer Results obtained in a specific
context are transferred to another
comparable site
Source: Modified based on Requier-Desjardins, Adhikari, and Sperlich 2010.
Note: WTP = willingness to pay.
Potential biases; context specific
Potential biases; context specific
Can be inaccurate; depends on how
similar context or factors are
To infer the costs and benefits of land degradation and land improvements, studies in the
literature mainly employ the following:
1. Replacement cost approaches
2. Nonmarket valuation techniques, such as hedonic pricing, contingent valuation, and
choice experiments
3. Productivity change approaches
4. Avertive behavior and damage costs approaches
5. Benefit transfer
The methods under (2) and (4) are of special importance in the valuation of off-site costs of land
degradation. Values obtained with any of the methods can theoretically be transferred to other sites
when the valuation context is similar by using the benefit transfer method. However, benefit transfer
should be used with caution, as it can be misleading when important influencing factors are
underestimated or unknown.
41 See, for example, Requier-Desjardins, Adhikari, and Sperlich (2010) for an overview of economic ecosystem
valuation techniques or Görlach, Landgrebe-Trinkunaite, and Interwies (2004).