Willingness to Pay the Financial Public Needs of Urban Population through the Third Sector (Case Study: The City of Isfahan)

اقتصاد و توسعه منطقه ای

Article 1, Volume 25, Issue 15, April 2018, Pages 1-24   

Document Type: Research article

DOI: 10.22067/erd.v25i16.65363

Authors

mahdi toghyani¹; somayeh mahdavi^{* 2}; arman roshandel¹

¹esfahan

²ragheb esfehani

Abstract

Extended Abstract
With the development of urbanization, financial needs of municipalities have increased. Nowadays, municipalities have the responsibility of providing public services in cities, but the annual budget allocated to them does not suffice to fulfill some needs. These financial needs have forced municipalities to use new methods to provide resources, including the third sector, that is, using donations and charity contributions. The present study aims at investigating people's willingness to pay a part of their financial resources in the form of donations (the third part) in order to fulfill urban public needs through conditional valuation. For this purpose, 613 questionnaires were distributed among groups of different incomes in the city of Isfahan. The data were analyzed using logit model. The results showed that people's willingness to donate is affected by the following seven variables: gender, awareness of urban needs, concern for the city, divine motives, clarity of the donation process, the existence of a reliable institution, and the offered prices. Each family in Isfahan was found eager to pay 641760 Rials (641760 Tomans) per month to support urban public services; therefore, the number will be 36 billion, 169 million Tomans per month for all the families living in Isfahan.
Research Methodology
The present research is of applied and descriptive-causative type. In this study, a questionnaire was designed using the available techniques in the contingent valuation method and then the required information was collected and analyzed. Sampling method was done according to Michael Carson Table.
The contingent valuation method (CVM) is a method for expressing  on-market goods, which provides the ability for individuals to understand that goods or services by designing an imaginary market for the the desired goods (which is not priced). In this way, the amount of willingness to pay will be asked in the form of a questionnaire. The most important step in the conditional valuation is designing the questionnaire, because if the principles are not met for the design of the questionnaire, the results of the research will not have much conceptual validity. In addition to the proposed amounts, factors affecting the willingness to pay will be examined in this questionnaire. The method of estimating the willingness to pay is based on the logit model.
In the logit model, the dependent variables are qualitative, while the independent variables can be a combination of qualitative and quantitative variables. The variables of this model are investigated according to two modes: payment modes (one) and non-payment modes (zero).
In which the p is probability of the occurrence of the desired event in the i-th observation and y_i is also the value of a random variable that can be zero or one depending on the situation. By placing  =    and taking logarithms, the sum of probabilities will be calculated and the estimation of independent coefficients (i.e. the vector β ') will be obtained by maximizing it. And finally the function of the willingness to pay the financial needs is introduced in the following:
To measure the willingness to pay  the utility function, the benefits of services and goods are analyzed in Rial. In this case, to meet the urban needs, the utility of the person for  paying this amount is more than the state of non-payment . By substituting this utility function in the probability function and integrating it, the amount of willingness to pay will be calculated.
Results and Discussion
The results of the estimation are presented in the following table:
Table 1 Estimated logit model results




Logit Model Estimation ResultsSignificance level


Z Statistical


Standard deviation


Estimated coefficient


Variable




0.0067


-2.710162


0.293147


-0.79447


GEN




0.0000


4.238563


0.287065


1.216743


AWARE




0.0091


2.607097


0.306768


0.799775


IN




0.0449


2.014169


0.287612


0.579300


MOTI




0.0004


3.535187


0.340699


1.204436


TRANS




0.0143


2.450453


0.277963


0.681137


TR




0.0000


-12.021892


3.82E-06


-4.59E-05


BID




0.0289


2.183995


0.507315


1.107974


Width from origin




MCF = 0.508        Prob (LR Statistic) = 0.000       LR Statistic=0.403




 
At the 95% confidence level, gender is negative and also significant. The reasons for the less willingness of males for participating in payment are their dissatisfaction with the attitude of employees and the municipality officials and the unfairness of many rules of this organization.
 At the same level of confidence, the awareness variable is positive and significant, because increasing awareness in society increases the participation rate and the sense of responsibility of the citizens. The positive and significant relationship with the interest variable at the 95% confidence level showed that individuals are sensitive to the progress of their city, and every effort is made to increase it. Motivation is another positive and significant variable at the 95% confidence level, as religious backgrounds in Iran are high and the rate of willingness to pay is effective. At the same level of confidence, transparence is positive and significant, because increasing transparency in the municipality reduces the possibility of corruption and leads to the informed decision making. Trust is another positive and meaningful variable at the 95% confidence level, which shows that people's trust in trusted institutions is one of the key factors in attracting resources and capitals.
At the 95% confidence level, BID has a negative and significant. The negative sign in this variable show the demand law, in other words, When prices rise, the willingness to pay will decrease. The average value of WTP after estimation was 64176 USD at the 95% confidence level (see Table 2).
 
Table 2 The value of respondents willingness to pay




The value of willingness to pay ignificance level


Z Statistical


Standard deviation


Estimated coefficient


Variable




0.0000


10.04


2789.96


64176


wtp




 
Conclusion
The findings showed that every household in Isfahan is willing to pay 64176 tomans per month to meet urban needs; this amount will be 36 billion and 169 million tomans for all households in Isfahan. As 34 percent of the statistical population  is willing to pay, the total available resources from the popular assistance in Isfahan are about 12 billion and 626 million tomans per month.

Keywords

urban needs financing; Willingness to pay; economice of third sector of; public sector in urbans; Logit model

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