Kebersihan. • Collected waste is often disposed of in .... purchase the proposed
good, relatively to the Group 0. 2 However, when they discussed the CV ...
Social Interaction and Public Goods Provision: A Case of Waste Management in Bandung, Indonesia Martin Daniel Siyaranamual Center for Economics and Development Studies Padjadjaran University
Forum Kajian Pembangunan, July 2012
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Outline 1 Motivation Introduction Objectives 2 Defining Social Interactions 3 Literature Review The Effect of Social Interactions Valuation Studies on SWM 4 Methodology: CVM The Contingent Valuation Method Sampling Design 5 Results Socio-Economic Profile Response Analysis and Household Demand Estimation 6 Conclusion 2
Introduction • Issues of Solid Waste Management (SWM) in the rapid
urbanizing cities: • Rapid population growth overwhelms the capacity of most
municipal authorities. • One to two thirds of the solid waste generated cannot be collected by the local state-owned company called PD. Kebersihan. • Collected waste is often disposed of in uncontrolled dump-sites. • SWM are often under-priced or non-priced.
• The use of contingent valuation method (CVM) to value
public goods/services • The CV results are coming from hypothetical behaviours in
a hypothetical marketplace. • How to minimize the gap between hypothetical and actual
behaviours. • Employing time to think feature. • Incorporating social interactions. 3
Objectives
• Academic contributions: • Opening a new path to narrow the gap between hypothetical and actual behaviours by incorporating social interaction effects • Providing a new result for time to think for the case of local public goods. • Policy recommendations: • Providing information to Bandung Municipality government about attitudes and opinions of Bandung Municipality residents toward SWM issues. • The demand for the improvements of SW services.
Defining Social Interactions
• The definition of reference group: Who interacts with
whom? • The group of all persons in the population that endowed the
similar characteristics. • Subjective information on an individual’s reference group.
• Endogenous versus contextual social interactions (Manski,
1993). • Non-random selection into reference groups. • Reference group-based sample as all respondents within a
sampled community are interviewed in principle.
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Literature Review: The Effects of Social Interactions • Theoretical models of social networks: • Private provision of public goods in networks (Bramoullé and Kranton, 2007). • Adoption decision in which social interactions are present (Brock and Durlauf, 2008). • Relative consumption concerns of those close to us (Ghiglino and Goyal, 2010). • Empirical investigations: • The effect of social networks on technology adoption in Northern Mozambique (Bandiera and Rasul, 2005). • The effect of social networks on job search in Egypt (Wahba and Zenou, 2005). • Juvenile delinquency and conformism (Patacchini and Zenou, 2009).
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Literature Review: Valuation Studies on SWM
The valuation studies on solid waste management based on where the study took place: • the studies in the developed countries aim to reduce
landfill. • While in the developing countries focus on the benefits of
providing/improving the basic solid waste disposal methods such as collection.
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Previous Studies Common findings: • There is a demand for improved SWM program, either in
developed or in developing countries. • SWM services are very often placed ahead of other major
social concerns. • SWM services are normal economic goods. • The WTP value increases in general with education level,
awareness level and past positive experiences. • Family size seems to affect negatively the WTP (Huang
and Ho, 2005). • The families having kids may be ready to pay more (Lake
et al., 1997). • WTP for a principal SWM service ranges between 1-3% of
household income. 8
The Contingent Valuation Method
• CVM questionnaire consists three parts: 1 A detailed description of the good(s) which being valued and the hypothetical circumstance under which it is made available to the respondent. 2 Questions that elicit the respondents’ WTP. 3 Questions about respondents’ socio-economic and other characteristics. • Using dichotomous choice combined with the
dissonance-minimisation for the elicitation question. • Neighbourhood retribution as the payment vehicle. • Using parametric (linear logit model) method to determine
the WTP.
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Sampling Design • 10 communities were divided equally into two groups:
Group 0 (control communities) and Group T (treatment communities). • Group 0 consists of 300 respondents. • Group T consists of 600 respondents. • Respondents of Group T were divided into two sub-groups:
Group T0 (untreated respondents in the treatment communities) and Group T1 (treated respondents in the treatment communities). • The respondents who belong to the Group 0 followed a
standard CV survey. • respondents in Group T1 were interviewed in two sessions. • Group T0 respondents were interviewed on the same day as the second interview session for the Group T1 respondents. • all respondents were asked to provide five friends. with whom they spend most of their social time. 10
Sampling Design
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Socio-Economic Profile
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Yes Responses Without Social Interactions Effect
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Yes Responses With Social Interactions Effect
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Results from Multivariate Models
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Estimates of Mean Willingness to Pay
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Conclusions Substantial effect of social interactions. 1
Group T1 respondents have lower the probability to purchase the proposed good, relatively to the Group 0.
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However, when they discussed the CV scenario with their neighbours, it turns out that the probability increases significantly.
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The MWTP of Group T1 is Rp. 9732.33 (equivalent to US$ 1.57; PPP).
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While for those with social interactions effect, the MWTP estimate increases by 66% to Rp. 16168.67 (equivalent to US$ 2.61; PPP).
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The MWTP of Group T0 is Rp. 9537.93 (equivalent to US$ 1.54; PPP).
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The MWTP of Group T0 with social interactions is Rp. 17209.36 (equivalent to US$ 2.78). 17
