Analysis of Economic Value of Lake Ziway: An Application of Contingent Valuation Method

Abstract

Lake Ziway provides numerous environmental services. However, despite these importance’s because the Lake has public goods characteristics it faces numerous threats. Therefore, conservation of Lake Ziway becomes very essential otherwise the Lake will disappear in the near future. To design appropriate policy intervention for its conservation it is important to know its economic value through valuation methods. For this reason this study analyzed the economic value of Lake Ziway using contingent valuation method. Contingent valuation method used estimate household’s WTP for the conservation of the Lake in money contribution; to do this a face-to-face interview were done with 261 randomly selected households. Seemingly Unrelated Bivariate Probit Model was used to analyze the determinants of household’s WTP and to calculate the mean WTP which obtained from Double Bounded Dichotomous. Accordingly, the result from Seemingly Unrelated Bivariate Probit Model shown that the two bid levels, income, satisfaction within the current condition of the Lake, dependency ratio, house ownership, environmental awareness and job in the Lake are significant factors that affects household’s WTP. The mean WTP estimated from the Double Bounded Dichotomous Choose found to be birr 50.99 and the total willingness to pay for the conservation of Lake Ziway was found to be 608,055.75 birr annually. Generally, the study found that households are highly willing to pay for the proposed Lake conservation plan. So, the city administration should introduce management and conservation program for efficient and sustainable utilization of the Lake.

Keywords: Willingness to pay, Contingent valuation method, Lake Valuation

JEL Classification: Q