Testing Welfare Measurement Gains of Combining Stated and

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Transcript Testing Welfare Measurement Gains of Combining Stated and

Techniques for
Measuring the Economic
Values of Recreation of
El Yunque
Dr. John Loomis
Dept. of Agricultural & Resource Economics
Colorado State University
&
Luis E. Santiago
University of Puerto Rico
Background design by JM Gonzalez
What are some types of
Economic Values?
• Human Use Values
– Human Health
– Recreational Enjoyment
What are some types of
Economic Values?
• Human Use Values
– Human Health
– Recreational Enjoyment
• Human Non-use Values
– Existence Value
– Bequest Value
How Do Economist Measure
Economic Values?
• The economic value to humans is
measured by the maximum amount of
money or other goods they would pay
• Price is a measure of what people
would pay for one more unit
• However, natural resources can have
economic value to people even if NO
cash flow or NO financial return
How Do Economist Measure
Non Market Values?
• The economic value to humans is measured
by the maximum amount of money or other
goods they would pay
• Price is a measure of what people would pay
for one more unit
• For non market goods like water quality or
public land recreation we have to estimate a
“shadow price” based on their willingness
to pay (WTP)
Economists do not Assign Values
• Non market valuation economists are
like detectives.
• We observe how humans make tradeoffs between recreation or
environmental quality and money
– Increased house prices near clean water
– Amount of money spent to visit a
recreation site
Methods to Measure Willingness to Pay
for Recreational Resources
• Urban setting:
– House price increases to be close to
beach, clean lake, forest, etc.
Property Value Enhancement From
Conservation & Restoration
• Hedonic Property Method is
used to quantify the increase in
property value arising from
conservation or restoration of
surrounding lands or water
• In California we found:
– +11 to 13% for Fish habitat
improvements & Env Ed
Trail
Methods to Measure Willingness to Pay
for Recreational Resources
• Urban setting:
– House price increases to be close to
beach, clean lake, forest, etc.
• Rural or Public Lands setting
– Travel Cost Method
• Variation in visitors travel costs are used to
trace out a demand curve
• From the demand curve we calculate net
willingness to pay or consumer surplus
Travel Cost Method Demand Curve and
Consumer Surplus
Travel Cost or Price $
/Unit or Trip
$90
Net Benefit to Consumer/visitor
$70
$50
$30
$20
Consumer Surplus
Travel Cost = $10
Demand Curve
Cost/Expenditures
1 2
3
4 5
6 7
8 9
# of Trips per year
Another Way Economists Estimate
Non Market Values
• For changes in environmental quality or
non-use values, there may be little
observable behavior…
– Economists construct a simulated market in a
survey, to ask people what they would pay if
there were a market or a voter referendum on
the protection of environmental quality or the
recreation site.
– Called the Contingent Valuation Method or
CVM
Stated Preference Recreation
Economic Models
• Contingent Valuation Model (CVM)
– Stated Preferences: Intended Behavior
– Obtains information on WTP of visitors
– Relates WTP responses to changes in site
characteristics
– Allows us to determine consumer’s
surplus directly
Empirical Application
• Location
– El Yunque, Caribbean
National Forest.
• Sites
– Visitors
• Espiritu Santo
• Mameyes
• Fajardo
• In person interviews
– Interviews were done during
summer 2005 & 2006.
– Questions included visitor
demographics, number of
visits and perceived site
conditions.
Need for Study
• Natural Resource Managers often need to
know:
– Value of Protecting Natural Features such as
Waterfalls from hydropower development
– Added value of providing visitor access to
Natural Features such as Waterfalls as road
construction to waterfall areas can be expensive
– Added value of providing trails at recreation
areas, as trail construction & maintenance is
also expensive
Purpose of Study
• To provide economic valuation
information on incremental value of
recreation with waterfalls and trails
• Illustrate how the Contingent
Valuation Method can be applied to
provide:
– An overall value of current recreation
– How that value changes with presence of
waterfalls and construction of hiking
trails
WTP Function
• WTPit = (A1i, . . . , Ani, D1i , . . . , Dni )
• WTPit = net benefits (willingness to pay) from recreation
experience
• A1i, . . . , Ani = built and natural site attributes such as
scenic views, the presence of waterfalls, availability of
parking spots and the presence of foot trails
• D1i, D2i , . . . , Dni = demographic characteristics of the
visitor, including gender, age, level of education, and
annual income
– i = individual respondent to survey
– t = date
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Components of the Contingent
Valuation Simulated Market
• Item to be valued: recreation site
• Payment vehicle: recreation trip cost
• Time frame of payment: PER TRIP
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Contingent Valuation
WTP Question
“if the cost of this visit to this river was
$____ more than what you have already
spent, would you still have come
today?”
– Bid amounts ranged from $1 to $200 per
trip.
Descriptive Statistics
River
Number of Observations
Espiritu Santo
Fajardo
Mameyes
164
235
593
2 of 7
sites
Natural and Built Site Variables
Presence of Waterfalls
3 of 5 sites
2 of 5 sites
Presence of Scenic Views
3 of 5 sites
3 of 5 sites 5 of 7 sites
Presence of Formal Trails
1 of 5 sites
0 of 5 sites 2 of 7 sites
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Econometric Estimation of
WTP Function: Logit Model
• Probability (YES) =
{1 + exp[β0 - β1(X) + βA (A) + βD (D)]}
• Where:
• β0 = the intercept.
• β1 = the coefficient on the bid variable,
• X = the given bid amount,
• βA = the coefficient on the built and
natural site attributes (An), and
• βD = the coefficient on the demographic
variables (Dn).
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Logit Model Statistical Results
Variable
Coefficient z-Statistic
Prob.
Constant
1.1375
5.572
0.000
BID ($)
-0.0094
-13.59
0.000
WATERFALL
0.2126
2.1485
0.032
FOOT TRAILS
0.1774
1.6924
0.091
EDUCATION
-0.0234
-1.6865
0.092
GENDER
0.1775
2.154
0.031
Internal Validity: Negative Coefficient on Bid Amount:
Higher $ asked to pay, lower probability visitor would pay.
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Additional WTP per trip for Natural Features
derived from Logit Coefficients
Calculated by dividing the Attribute coefficient
by the coefficient on the Bid Amount ($)
W aterfall
$23.07
Foot Trails
$19.24
WTP for Visiting El Yunque
& for Natural Features
• The median net economic value of a
visit to the the rivers without
waterfalls or foot trails is $96.
• Recreation at rivers with both
waterfalls and foot trails has a
median value of $138 per trip.
• The presence of waterfalls accounts
for $23 and foot trails $19 per trip.
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Policy Implications for Management
– Selecting recreation site locations.
– Protecting sites from competing uses,
such as locations with waterfalls, also
coveted by others for hydropower
development.
– Improving existing site facilities
• Only 3 of 17 sites have formal trails.
• Some sites, especially outside the CNF, don’t
have adequate parking, picnic areas , regular
trash collection.
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Conclusions
• Non market valuation can help
eliminate the myth of
– The Economy vs the Environment
– The environment has economic value to
visitors and households that want to
protect the opportunity to visit in the
future
Conclusions
• Non market valuation can help
eliminate the myth of
– The Economy vs the Environment
– The environment has economic value to
visitors and households that want to
protect the opportunity to visit in the
future
– This non market value can be measured
using the Contingent Valuation Method
Conclusions
• El Yunque provides an economically
very valuable recreation experience to
visitors
• There is a substantial economic value
even if there is little direct cash flow to
the U.S. Forest Service
Questions?