Semi-nonparametric estimation of binary response models with an application to natural resource valuation

A semi-nonparametric binary response model is estimated to obtain the willingness to pay for the environmental quality improvement when the willingness to pay is restricted to be nonnegative. The model estimation is straightforward by using conventional maximum likelihood software. Because the semi-nonparametric model is the generalization of the parametric model, the generality can be assessed by a likelihood ratio test. By using an existing referendum survey data set, it is shown that the semi-nonparametric estimation provides a significant improvement over the parametric estimation. The willingness to pay is sensitive to the distribution assumption.