A Consistent Framework for Valuation of Wetland Ecosystem Services Using Discrete Choice MethodsEPA Grant Number: R831598
Title: A Consistent Framework for Valuation of Wetland Ecosystem Services Using Discrete Choice Methods
Investigators: Milon, J. Walter , Scrogin, David , Weishampel, John F.
Institution: University of Central Florida
EPA Project Officer: Hahn, Intaek
Project Period: April 1, 2004 through March 31, 2006 (Extended to December 31, 2007)
Project Amount: $313,797
RFA: Valuation for Environmental Policy (2003) RFA Text | Recipients Lists
Research Category: Economics and Decision Sciences
The overall goal is to develop and test a consistent framework to estimate wetland services values. The diverse nature of wetland services negates complete valuation through a single method or data source. Our approach uses a joint modeling strategy to integrate revealed preferences (RP) from a discrete choice model of the housing market and stated preferences (SP) from a choice model for wetland ecosystem services. There are four interrelated objectives to implement this strategy: 1) to estimate the demand for proximity to wetlands and other water resources using discrete choice and hedonic pricing models of residential property values; 2) to estimate the demand for ecosystem services from different types of wetlands that are not in proximity to residential property using a stated choice survey; 3) to develop and test a combined discrete choice model from the RP and SP data to produce a general valuation function for wetland ecosystem services, and 4) to estimate the implicit prices of wetland services in wetland mitigation banking markets.
The analysis will be based on a comprehensive database from a stratified sample of residential property owners in three Metropolitan Statistical Areas (MSAs). Discrete choice and hedonic pricing models of the housing markets in these MSAs will be estimated and welfare (willingness to pay) estimates for proximity to wetland resources from the two models will be compared. The stratified sample of property owners will participate in a stated choice survey designed to: a) elicit preferences for different ecosystem services (non-use values) that are provided by wetlands; and b) evaluate the effects of information about the spatial context of wetland ecosystem services on preferences. Using the RP and SP data from the stratified sample, a combined preferences model will be estimated and the parameters used to compute welfare measures for wetland services. The effects of individual and dynamic heterogeneity on preferences will also be evaluated in the joint modeling. In addition, sales data from private wetland mitigation banks will be used to estimate a hedonic pricing model and derive implicit prices for wetland services sold through mitigation markets. The estimated marginal and total values from the discrete choice and hedonic price housing models, the SP model, the combined RP and SP model, and the hedonic price mitigation bank model will be compared and used to test hypotheses about the relationship between values for different types and combinations of wetland services.
This research will provide a framework to assess the economic value of different types of wetlands and ecosystem services. The results can be used for policy analyses of Clean Water Act programs for wetland ecosystems such as values from protection of isolated wetlands or to assess tradeoffs between in-kind and out-of-kind mitigation and in-lieu-fee payments for compensatory mitigation.