Making benefit transfers work: deriving and testing principles for value transfers for similar and dissimilar sites using a case study of the non-market benefits of water quality improvements across Europe

We develop and test guidance principles for benefits transfers. These argue that when transferring across relatively similar sites, simple mean value transfers are to be preferred but that when sites are relatively dissimilar then value function transfers will yield lower errors. The paper also provides guidance on the appropriate specification of transferable value functions arguing that these should be developed from theoretical rather than ad-hoc statistical principles. These principles are tested via a common format valuation study of water quality improvements across five countries. Results support our various hypotheses providing a set of principles for future transfer studies. The application also considers new ways of incorporating distance decay, substitution and framing effects within transfers and presents a novel water quality ladder.