Demand for Watershed Services: Understanding Local Preferences through a Choice Experiment in the Koshi Basin of Nepal ,Working Paper No. 88 -14

By : Rajesh Kumar Rai, Mani Nepal, Priya Shyamsundar and Laxmi Dutt Bhatta

In this study, we undertake a choice experiment in order to identify differences in local demand for watershed services in the Koshi basin of Nepal. We first examine the possibility of using a non-monetary numéraire to estimate household willingness-to-pay for watershed services. Survey results indicate that while some 50% of the population is willing to pay in monetary terms for environmental services, this number goes up to 75% when asked to contribute in labor time. Social benefits from environmental services are 1.4 to 2.2 times higher in labor hours relative to benefits estimated in monetary terms. Thus, in developing countries, households are more likely to express their demand for watershed services by offering their time rather than making a monetary payment. Our results also suggest that locational differences matter. Down-stream community members, who practice commercial vegetable farming, have a higher demand for watershed services and are willing to pay a third more than upstream farmers for these services.

Keywords :Choice Experiment, Labor Contribution, Mode of Payment, Opportunity Cost of Time, Watershed Services

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