Grantee Research Project Results
Final Report: Updating Prior Methods for Non-Market Valuation A Bayesian Approach to Combining Disparate Sources of Environmental Values
EPA Grant Number: R825310Title: Updating Prior Methods for Non-Market Valuation A Bayesian Approach to Combining Disparate Sources of Environmental Values
Investigators: Herriges, Joseph A. , Kling, Catherine L.
Institution: Iowa State University
EPA Project Officer: Chung, Serena
Project Period: October 1, 1996 through September 30, 1998
Project Amount: $210,199
RFA: Decision-Making and Valuation for Environmental Policy (1996) RFA Text | Recipients Lists
Research Category: Environmental Justice
Objective:
The three objectives of this research project were to: (1) develop and test a Bayesian procedure for combining disparate sources of nonmarket valuations, (2) develop and test Bayesian procedures for benefits transfer, and (3) estimate the value of wetland restoration in the state of Iowa. Although all three objectives have been met, the first two were altered, in that a classical paradigm was used rather than the Bayesian paradigm.
Summary/Accomplishments (Outputs/Outcomes):
This project investigated the integration of disparate sources of data to improve the understanding of the value of nonmarket environmental goods, specifically wetlands in the state of Iowa. The integration of disparate data sources refers to the combination of contingent valuation and travel cost data, the combination of travel cost and contingent behavior data, and finally the transfer of travel cost or contingent valuation data from a set of studied sites to an unstudied policy site.
The first task to meeting these objectives was survey and sample design. The survey elicited several kinds of information from respondents. First, a series of questions was posed concerning the various visits these individuals made during the past year to wetland areas across the state. After establishing their current usage pattern, the survey respondents then were asked a contingent behavior question. In particular, the respondent was asked whether he/she would have taken at least one visit to a specific location if the price of visiting that location was higher. This question was followed with a question asking the respondent to indicate how many trips he/she would have taken to each of the wetlands areas assuming that this new, higher cost of taking the trip was in effect. A protest question completed this portion of the survey.
The next major section of the survey collected information on a variety of issues related to current knowledge about wetlands and opinions about how these areas should be managed. The third component of the survey contained a detailed scenario concerning one of two major wetland areas in the state. One of the scenarios concerned the Prairie Pothole Joint Venture, a program that has restored wetlands in several states in the upper midwest, including Iowa, as well as in portions of Canada. The second scenario was based on the Iowa River Corridor Project, a second major wetlands restoration effort in Iowa.
The final survey instrument was constructed and mailed to 6,000 Iowa households in February and March 1998, with an overall response rate of 58 percent. Using the software package PCMiler, travel time and travel costs to each aggregate site identified in the survey were constructed for each household and each destination in the 99 counties of Iowa.
Results on Combining Disparate Sources of Nonmarket Data. Economists began investigating the use of surveys to elicit consumers' willingness-to-pay for public goods over three decades ago. The vast majority of the early applications concerned environmental goods, although numerous other public goods have been the subject of valuation surveys. In the last decade, the use of surveys to elicit welfare values has come under debate by the profession at large. The fundamental question in this debate might be stated as follows: Can carefully designed survey methods provide informative data on consumers' willingness-to-pay for public goods, or does the hypothetical nature of these instruments render them irrelevant, regardless of how much attention is given to truth-revealing mechanisms in their construction?
Critics of SP have presented numerous arguments concerning likely sources of bias in the method. For example, it has been argued that survey respondents are unlikely to pay attention to their budget constraint in answering hypothetical questions. One procedure for assessing the validity of survey methods is to consider whether the preferences implied by answers to survey questions are consistent with preferences implied by observed behavior for the same individuals. In this approach, public goods for which there are market-like data or revealed preference (RP) data are valued using standard demand models or discrete choice approaches. Survey data also are collected and used to estimate the parameters of the same model as the RP data; tests of equality of the parameters are then undertaken to formally test consistency of the two data sources.
In this project, we formulated and tested specific hypotheses concerning sources of bias in survey data. The hypotheses were tested using revealed preference data to determine whether the underlying parameters are consistent between the two sources of data. Additionally, we formulated and tested hypotheses concerning sources of bias in revealed preference data. In this case, the hypotheses are tested using the stated preference data as the baseline from which to test consistency between the two data sources. In carrying out these sets of hypothesis tests, we carefully investigated alternative interpretations of the various results, noting particularly how the interpretation of the same results can vary with the "school of thought" of the reader.
Results on Procedures for Benefits Transfer. The Repeated Mixed Logit (RXL) model, a generalization of the standard Multinomial Logit Model, was estimated using the Iowa wetlands data. The RXL model allows the coefficients to vary randomly rather than being fixed. With this generalization, the model no longer exhibits the IIA property and can accurately represent a much wider variety of choice situations.
Using this model, the demand for wetlands in Iowa was estimated for each of five megazones (a grouping of the 15 identified wetlands areas into larger "sites"). The purpose was to examine the benefit transferability issue (i.e., whether the results from one megazone are transferable to megazones elsewhere). Recreators' willingness-to-pay for closing down all zones with each mezagone also was calculated.
The results indicated that cost, age, gender, and license holding all are significant determinants of individuals' choice decision in each megazone. Though some megazone models have similar coefficient estimates, individuals in different megazones have difference choice patterns, which is suggested by likelihood ratio tests. Also, the welfare measures associated with closing down all of the zones with each megazone vary across the megazones, which can be tested formally using nonparametric methods such as the Wilcoxon rank sum test. The results suggested that we should be cautious about transferring estimated results from one megazone to the other.
Results on Estimating the Value of Wetlands in Iowa. Using both parametric and semi-nonparametric estimators, a contingent valuation analysis of the Prairie Pothole Joint Venture suggests that households are, on average, willing to pay about $4 for the program to restore roughly 38,000 acres of wetlands. These valuations vary significantly by the characteristics of the households, with hunters and fishers willing to pay significantly more, and older Iowans willing to pay significantly less.
The average aggregate amount that Iowa households are willing to commit to wetland restorations that take place in the next 15 years is $150.14 per acre. When individuals responded to the contingent valuation question in our analysis, they were aware of the benefits and costs associated with wetlands. This includes the gain in flood control, water quality improvement, and wildlife habitat. The value we estimated then reflects both use and nonuse values for wetlands. Given the current land prices in Iowa, it is doubtful the value reported here could buy land already in a wetland state from private individuals for the purpose of maintaining the wetland indefinitely.
Journal Articles on this Report : 3 Displayed | Download in RIS Format
Other project views: | All 10 publications | 3 publications in selected types | All 3 journal articles |
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Crooker J, Kling CL. Nonparametric bounds on welfare measures: a new tool for nonmarket valuation. Journal of Environmental Economics and Management 2000;39(2):145-161. |
R825310 (Final) |
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Herriges JA, Phaneuf DJ. Inducing patterns of correlation and substitution in repeated logic models of recreation demand. American Journal of Agricultural Economics 2002;84(4):1076-1090. |
R825310 (Final) |
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Phaneuf DJ, Herriges JA. Choice set definition issues in a Kuhn-Tucker model of recreation demand. Marine Resource Economics 1999;14(4):343-355. |
R825310 (Final) R826615 (1999) R826615 (2000) R826615 (Final) |
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Supplemental Keywords:
public policy, cost benefit, nonmarket valuation, contingent valuation, survey, willingness-to-pay, wetlands., RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Economics, decision-making, Ecology and Ecosystems, Social Science, Economics & Decision Making, public resources, social psychology, benefits transfer, midwest, contingent valuation, ecosystem valuation, policy analysis, valuing environmental quality, Bayesian approach, decision analysis, environmental assets, preference formation, standards of value, non-market valuation, conservation, cost benefit, economic incentives, environmental values, cost/benefit analysis, environmental policy, psychological attitudes, public values, aquatic ecosystems, public policy, willingness to pay, wetlands preservation, value transfersRelevant Websites:
http://www.econ.iastate.edu/faculty/herriges/
Progress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.