Valuing the benefits of public libraries

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<ul><li><p> 2004 Elsevier B.V. All rights reserved.</p><p>political discussions spurred by growing pressure on public budgets. In 2002, the</p><p>Ministry of Cultural and Church Aairs suggested an amendment of this article,</p><p>which was interpreted by many in the library profession and local authorities as a</p><p>step to loosen the municipalitys obligation to have a public library. Due to massive</p><p>Information Economics and Policy 17 (2005) 175198</p><p>INFORMATIONECONOMICSAND POLICY*JEL classication: H31; H41; H70Keywords: Public goods; Public libraries; Contingent valuation</p><p>1. Introduction</p><p>By law, all Norwegian municipalities shall have a public library (Public LibraryAct, 1985, Section 4). This article in the Public Library Act is subject to currentValuing the benets of public libraries</p><p>Svanhild Aab *</p><p>Faculty of Journalism, Library and Information Science, Oslo University College, P.O. Box 4,</p><p>St. Olavs Plass, N-0130 Oslo, Norway</p><p>Received 6 April 2004; received in revised form 15 April 2004; accepted 11 May 2004</p><p>Available online 20 July 2004</p><p>Abstract</p><p>Constraints on public budgets oblige libraries to document their value. This paper presents</p><p>a contingent valuation study eliciting how a random sample of Norwegian citizens values</p><p>public libraries, applying two recently developed elicitation approaches. Possible and actual</p><p>protest bids are dierentiated and a split sample used, eliciting both willingness to pay (WTP)</p><p>and to accept (WTA). An overwhelming majority perceives they have property rights to a local</p><p>library, justifying the application of WTA. Estimates of WTA among non-protesters are</p><p>higher than estimates of WTP but only by a factor of about 4. Several measures of average</p><p>valuation are derived, all being higher than average costs.</p><p>www.elsevier.com/locate/econbaseTel.: +47-2245-2694; fax: +47-2245-2605.</p><p>E-mail address: svanhild.aabo@jbi.hio.no (S. Aab).</p><p>0167-6245/$ - see front matter 2004 Elsevier B.V. All rights reserved.doi:10.1016/j.infoecopol.2004.05.003</p></li><li><p>protests in the hearing the original proposal was withdrawn and only a minor</p><p>amendment was passed by the Parliament (Public Library Act 1985, 2003, Section 4).</p><p>The public libraries purpose is to promote enlightenment, education and other</p><p>cultural activity by the dissemination of information and by making books and other</p><p>suitable material available free of charge to all those who live in Norway (Section</p><p>1). This foundation, the free-of-charge principle, is also challenged and cause</p><p>176 S. Aab / Information Economics and Policy 17 (2005) 175198controversy in the Norwegian society because many municipalities today face severe</p><p>budget restrictions. There is also discussion whether or not to enhance local au-</p><p>tonomy at the expense of national laws regulating local public services, thereby</p><p>possibly deviating from the equity principle and accepting greater dierences in the</p><p>level of public services across municipalities. Public libraries are a topic in this</p><p>debate.</p><p>It is well known that a free market is likely to fail as a mechanism for allocating</p><p>public goods, including library services (Aab, 1988; Kingma, 1996), but they can bevalued using methods for nonmarket valuation. An objective of this study is to make</p><p>such an assessment of public libraries in Norway. Two main approaches to valuation</p><p>of nonmarket goods exist in the literature, namely revealed and stated preferences</p><p>(Mitchell and Carson, 1989). Of these only stated preference (SP) methods were</p><p>considered useful here, since they are capable of capturing nonuse values in addition</p><p>to use values. Recent research has shown that the value people attach to public li-</p><p>braries has a variety of origins, including appreciation of other peoples use, dis-</p><p>semination of knowledge and culture, upholding of the literary heritage and reducingof informational gaps (Aslib, 1995; Audunson, 2001). Contingent valuation (CV) is</p><p>by far the most widely used SP method. Within cultural economics there is a growing</p><p>CV literature (Noonan, 2003), including studies of theatres (Bille Hansen, 1997),</p><p>museums (Martin, 1994; Santagata and Signorello, 2000), cultural heritage (Ben-</p><p>hamou, 1996; Navrud and Ready, 2002), the arts (Throsby and Withers, 1983),</p><p>national television programming (Papandrea, 1999), and libraries (Harless and Al-</p><p>len, 1999; Holt et al., 1999).</p><p>This study appears to be the rst CV study valuing public libraries at a nationallevel, in Norway or internationally. 1 The aim is to determine whether public li-</p><p>braries in Norway are, overall, worth their price as viewed from the populations</p><p>perspective.</p><p>The study also has methodological aspects. Two elicitation formats are used re-</p><p>cently developed in environmental economics, which is at the fore in CV techniques.</p><p>To our knowledge, this is the rst comparative test of these elicitation methods</p><p>valuing the same good. We stress the detecting of response uncertainty and error and</p><p>develop a procedure for identifying and dierentiating possible and actual protest</p><p>1 National studies of public libraries and their value using other methods than CV have been conducted,</p><p>for instance in Britain (Morris et al., 2001), Australia (Mercer, 1995), and USA (DElia, 1993). CV was</p><p>used in cost-benet analyses of several urban public libraries in USA (Holt et al., 1999; Holt and Elliott,</p><p>2003) and is proposed included in a follow-up study measuring the benets and economic impacts frompublic libraries in Florida (McClure et al., 2001, 7, p. 10).</p></li><li><p>bids. A further important methodological feature is to apply both willingness to pay</p><p>(WTP) and willingness to accept (WTA), each used on half of the sample. Re-</p><p>searchers are cautious about applying WTA in CV studies due to possibilities of</p><p>implausibly high stated values. In our case however the property rights issue, as</p><p>discussed below, appears to make WTA imperative. Overall, this study gives clues to</p><p>whether CV, developed in economics, can contribute to the theoretical and meth-odological arsenal of library and information science. 2</p><p>The rest of the paper is organized as follows. Section 2 presents the survey,</p><p>public libraries. The respondents were told how the total costs in an average Nor-</p><p>wegian municipality are allocated among main budget posts. 5 The intention was to</p><p>S. Aab / Information Economics and Policy 17 (2005) 175198 177put libraries in a context and remind respondents of other local public goods that</p><p>compete for scarce private and public resources.</p><p>2 For a theoretical discussion of whether economic models for valuing nonmarket goods can fruitfully be</p><p>applied on public libraries, see Aab and Audunson (2002).3 100 NOK was US$ 8.5 at the time of the survey.4 In 2003, public libraries were ranked as number one of 53 public services, together with kindergartens</p><p>and physiotherapy (TNS Gallup, 2003).5 Education 25%, hospitals 22%, health care 16%, social security and welfare 12%, business 6%, ordinarySections 3 and 4 the WTP and WTA results, respectively, Section 5 protest bid</p><p>treatments, and Section 6 discussion and conclusions.</p><p>2. The survey</p><p>The survey was administered by a professional opinion company, ACNielsen</p><p>Norway AS, as part of their bimonthly omnibus survey (January 2000) that collects</p><p>data from a national random sample of private households. 999 persons over the age</p><p>of 15 were interviewed in their homes as representatives of their households.</p><p>Our CV study aims at measuring the total benets accruing to the Norwegian</p><p>population from public libraries, at todays activity and service levels. All 433 mu-</p><p>nicipalities of Norway have public libraries, comprising 1108 units. In 1997 they</p><p>owned 21.5 mill. document items and 22 mill. items were borrowed during that year.Children on average borrowed 9.3 and adults 3.2 books, and each inhabitant on</p><p>average visited a public library 4.5 times during the year. Total operating costs were</p><p>803 mill. NOK, which is 420 NOK per household (Norske folkebibliotek, 1998). 3</p><p>Norwegian public libraries are widely used; 52% of all citizens visit a public library</p><p>during a year and, except for cinemas, this is the highest percentage of use of any</p><p>cultural institution. Only 6% of the population aged 979 has never visited a public</p><p>library (Norsk kulturbarometer, 1997). The citizens satisfaction with the public li-</p><p>brary service is also high 4 and we infer that the good is familiar to the citizens.The rst part of the questionnaire used a top-down design, starting with a de-</p><p>scription of overall municipal services, moving down to cultural goods, and then topublic services 6%, recreation, culture and religion 4%, and other purposes 9% (Statistics Norway, 1998).</p></li><li><p>Only at this point focus turned to public libraries and specically to the respon-</p><p>dents local library. 6 A main concern is how each individual citizen values public</p><p>library benets. Public libraries can be seen as a mixed good. Some of their benets</p><p>have individual property rights (photocopies of journal articles), others have col-</p><p>178 S. Aab / Information Economics and Policy 17 (2005) 175198lective property rights (browsing facilities), and others again property rights that can</p><p>be considered as both individual and collective (book loan) (Aab, 1998). Privateand mixed goods are primarily distinguished by the dierence between individual</p><p>and collective property rights (Mitchell and Carson, 1989). To elicit the issue of</p><p>perceived property rights to public library benets we posed the question: Do you</p><p>think you have a right to have access to a public library in the municipality where</p><p>you live? The answers were almost unanimous, 94% saying yes, a much higher</p><p>fraction than those who stated to be library users, only 60%.</p><p>2.1. WTP versus WTA</p><p>CV implies that respondents are asked to state their values of a change in the</p><p>provision of a nonmarket good, in the form of WTP for an improvement or mini-</p><p>mum compensation (WTA) to accept a change to the worse. In theory, WTP and</p><p>WTA shall dier only by small amounts for nonessential goods with low budget</p><p>shares. Empirical WTA estimates are however often considerably higher than WTP</p><p>estimates for the same good (Hanemann, 1991; MacDonald and Bowker, 1994). Due</p><p>to this observation, and especially since the recommendation from the NOAA-panel to use WTP as a conservative choice (Arrow et al., 1993), when the natural</p><p>setting calls for estimating WTA it is instead customary to estimate WTP.</p><p>We conducted two pilot studies to test the scenario plausibility and use of the</p><p>WTA format. One hypothesis concerning the WTP/WTA discrepancy is the exis-</p><p>tence of an endowment eect, that is the supposition that individuals value losses</p><p>more that commensurate gains. MacDonald and Bowker (1994) studied the presence</p><p>of the endowment eect in an economic analysis of localized air pollution. Their</p><p>ndings show that perceived property rights may well be an important factor of thedivergence. If this is the case, the WTP/WTA choice becomes a crucial factor in</p><p>estimating potential welfare impacts of a policy alternative. If citizens appear to have</p><p>an inherent right to the valued good, the common practice of substituting WTP</p><p>measures for WTA will understate welfare impacts, increasing the probability of</p><p>rejecting a proposal that would provide a potential Pareto improvement (Mac-</p><p>Donald and Bowker, 1994, p. 547). In Norway, all citizens have a legally based right</p><p>to a local public library and, as seen in this study, acknowledge this right.</p><p>Another hypothesis is that the divergence between WTP and WTA values alsodepends on a substitution eect. Hanemann (1991) showed that the smaller the</p><p>substitution eect the greater the dierence between WTP/WTA. Public libraries</p><p>6 The local library is here dened as the public library in the municipality where the citizen lives and it</p><p>typically includes a main library and one or more branches. The local public libraries are a municipalresponsibility.</p></li><li><p>provide a wide range of services, some having high substitution ability (book loans)</p><p>and others very low (Reach out-services). Library and information studies show</p><p>that respondents appreciate social benets of libraries (Holt et al., 1999; Audunson,</p><p>possi</p><p>Bo TP</p><p>WTA ways</p><p>using nder</p><p>certai cate</p><p>the u our</p><p>study ised,</p><p>WTA , theindiv solid</p><p>majo g ar-</p><p>gume</p><p>2.2. T</p><p>Th Act</p><p>S. Aab / Information Economics and Policy 17 (2005) 175198 179Assume the Public Library Act amended, so that the municipalities them-</p><p>selves could decide whether or not they wanted a public library. Imagine</p><p>that the council administration was considering closing down the library.</p><p>An option would then be to use the public library in a neighbouring mu-</p><p>nicipality or to buy all books, reference manuals, information services,</p><p>etc., needed by yourself and your household. Library services to schools</p><p>and adult training courses and to various groups in the local community,</p><p>such as the Reach out-service to elderly in institutions, kindergartens,etc., will cease to exist.</p><p>Another alternative is maintaining the library services, if the municipal-</p><p>itys revenues are suciently increased through additional local taxes. 7</p><p>The WTA scenarios have the same framing but here the choice is between</p><p>either (1) closing down the local library to use the saved budget funds on otherand its purpose statement (Section 1) and continues to describe the choice situation:</p><p>It is well known that the economic situation in most of the municipali-</p><p>ties is deteriorating. This can imply that some public services have to be</p><p>reduced or closed down, unless the municipalitys revenues are increased.7 Thble high dierence between estimated WTP and WTA values.</p><p>yle and Bergstrom (1999, p. 192) discuss rational explanations of the W</p><p>disparity and comment on the NOAA Panels recommendation of al</p><p>WTP in CV studies: Because of the theoretical relevance of WTA u</p><p>n property-rights structures, it seems inconsistent simultaneously to advo</p><p>se of CV and exclude applications to WTA. For the choice situation in</p><p>, depicting the public library to be closed down if the local taxes are not ra</p><p>is arguably the theoretically correct welfare measure. In this situationiduals suer the loss of not being able to use the local library to which a</p><p>rity acknowledge their property rights. Due to this fact we found stron</p><p>nts to elicit also WTA.</p><p>he scenario design</p><p>e scenario description starts by referring to the Norwegian Public Library2001). Nonuse values thus motivated are shown to constitute a substantial share of</p><p>public libraries total value (Aab and Strand, 2004). Library services with high</p><p>nonuse value have small substitution eect and may be one of the explanations of ais scenario description was used in the two WTP subsamples.</p></li><li><p>municipality tasks beneting the household (e.g., education, health), or (2) main-</p><p>taining the library and also other municipality tasks on todays level of activity.</p><p>The scenario descriptions are constructed to elicit the total value of the local</p><p>180 S. Aab / Information Economics and Policy 17 (2005) 175198public library holistically (Randall, 1991). They do not intend to describe all attri-</p><p>butes or value components bu...</p></li></ul>

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