Non-participation and Heterogeneity in Stated: A Double Hurdle Latent Class Approach for Climate Change Adaptation Plans and Ecosystem Services

We introduce a double hurdle latent class approach to model choice experiments, where serial non-participants and clustered preference patterns are present. The proposed approach is applied to a recent stated preference study in which the residents of the Eastern Shore of Virginia answer choice questions about alternative coastal climate change adaptation plans. While the double hurdle latent class model avoids self-contradictory assumptions, estimates and tests show that, compared with an unrestricted latent class model, it achieves a significantly better statistical fit and maintains the capability to link the heterogeneity of participants’ preferences to their attributes. Moreover, the double hurdle latent class model also provides important implications in how to conduct welfare analysis based on different behavioral patterns of different groups, which leads to nontrivial changes in welfare measures. The empirical results highlight that certain ecosystem services may increase the willingness to pay for coastal climate change adaptation plans.