USING CHOICE EXPERIMENTS TO VALUE PREFERENCES OVER STORMWATER ...

126 Pages·2013·2.17 MB·English

USING CHOICE EXPERIMENTS TO VALUE PREFERENCES OVER STORMWATER
MANAGEMENT

BY

CATALINA LONDOÑO CADAVID

DISSERTATION

Submitted in partial fulfillment of the requirements
for the degree of Doctor of Philosophy in Agricultural and Applied Economics
in the Graduate College of the
University of Illinois at Urbana-Champaign, 2013

Urbana, Illinois

Doctoral Committee:

Associate Professor Amy W. Ando, Chair and Director of Research
Assistant Professor Kathy Baylis
Professor Madhu Khanna
Professor Noelwah R. Netusil, Reed College
Professor Charles J. Werth
ABSTRACT

Stated preference methods have long been used to estimate the monetary value of
environmental goods and services. I add to the traditional use of choice experiment surveys by
assessing different aspects of people’s preferences over stormwater management control features
and outcomes. I study whether heterogeneous status quo influence people’s willingness to pay
for the provision of a public good. I also analyze the inclusion of willingness to help (WTH) or
volunteering time as an addition to willingness to pay (WTP) the traditional approach that has
the limitation of being focused on budget constraints only. I discuss the results and compare
them in two different urban areas of the United States, which helps explore the stability of
parameters across different urban areas.
Stormwater management is a common environmental issue with a series of characteristics
that makes it ideal for the purpose of this study. Stormwater control is a current concern in
numerous urban areas across the country, where stormwater runoff becomes a problem,
especially with urban sprawl and the impervious surfaces associated with urban growth.
Stormwater runoff causes several environmental problems in addition to urban flooding, such as
pollution, alteration of hydrological regimes and erosion, but these effects can vary greatly
across small areas. Stormwater has been traditionally dealt with big infrastructure projects but
there is a decentralized approach that involves smaller scale solutions with ancillary
environmental benefits. Cities and municipalities struggle to find the optimal way to estimate the
benefits associated with the decentralized stormwater control and consequently, set policies for
its potential implementation.
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I show that people are willing to pay for traditional water quality improvements but also
for improved hydrological functions. I find that heterogeneous status quo affects the preferences
over stormwater control and proves to be an important factor when designing policy due to the
fact that some people might not benefit from certain policies. I also find that people are willing to
help or engage in activities that require time like installation and maintenance of stormwater
facilities, especially when it implies environmental benefits and not only reduction of flood
events. Finally, the comparison between different areas shows that for most attributes, there is no
significant differences in the estimates, and find certain factors that might influence preferences
over stormwater management.

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To the beautiful children in my life:
You make me happy when skies are grey…

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ACKNOWLEDGMENTS

The completion of this dissertation would not have been possible without the help and
support of many people and institutions.
I would like to thank my advisor, Dr. Amy W. Ando for her great disposition to discuss,
her insightful comments, and her kind and patient advice. I admire and wish to take home with
me her passion for economics, her work ethics, her profound respect for her colleagues and
students, and her great ability to balance her personal and professional life.
Thanks to my Committee members for your feedback. Your comments and suggestions
contributed to make this dissertation a work that I am proud of. Special thanks to Professor
Noelwah Netusil for her involvement with the Portland-Chicago chapters, her always useful,
positive and enthusiastic help, and a very productive visit to Portland. Many thanks to Professor
John Braden, Sahan Dissanayake, Rob Johnston, members of the W3133 group, and pERE
Seminar attendants for your valuable comments to improve early versions of this dissertation.
The funding for the surveys comes from the Illinois Water Resource Center IRWC, the USDA
W3133 project, Reed College and ULTRA-Ex, NSF award #0948983.
Thanks to the Fulbright Commission for this opportunity. I am proud to be a Fulbrighter
and will be happy to be an Ambassador wherever I go. Also, thanks to my Colombian sponsor,
the Escuela de Ingeniería de Antioquia for their support and encouragement, especially the
president Carlos Felipe Londoño, the Secretary, Olga Lucía Ocampo, and my good friend and
boss Ana María Zambrano.
I am happy to belong to the ACE Department. It is thanks to the work of those people
behind the curtains that we get to do our research, study, and graduate. Thanks to Linda Foste,
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Pam Splittstoesser, Melissa Wambier, James Wade, and Donna Stites for their quiet but
invaluable contribution to an outstanding Department. Special thanks to Dr. Alex Winter-Nelson
for his constant support to both students and professors.
My journey through the economics world began in 2008 with the core classes and I
would like to thank my first year professors for those hard times. When I look back to the whole
first year and the core exam, I see it as the most humbling time of my life, and also the most
rewarding. Special thanks to Professor David Bullock for –unknowingly- making me realize
what teaching really means.
To all my classmates who happened to take this journey with me, a big thank you. Those
endless study hours and discussions paid off. I can’t wait to see all of us graduated and living the
sweet life. Very special thanks to my dearest friend and “combo” Héctor Núñez. I have told you
many times, but it will never be enough: your knowledge and patience are the main reasons why
I survived the first year classes and passed the core exam.
To my Latin American friends in Champaign: Camilo Phillips, Maxi Phillips, Gonzalo
Gallo, Ani Duque, Carlos Gómez, Ana Arango, Andrés Gómez, Alejandra Restrepo, Juanes
Velázquez, Laura Atuesta, “Vaca” Medina, Silvia Remolina, Juan Santiago Mejía, Liz Rojas,
Andrés Trujillo, and the almost Colombian Ben Wood, you guys are the best. I hope life brings
us together again, but even if I do not see you as often as I would like, you are and always will be
my lovely Latino family away from home.
I am lucky enough to have found people who made Champaign-Urbana feel like a real
home. Beth, Bob, and Danny Miller, I am so grateful that we managed to build and maintain our
own little unique family. Words (in any language) will never be enough to thank you for
providing me with a sense of belonging that I know most international students never find. I
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cherish every minute we spent together and hope we can keep growing as a family despite the
distance. I love you very much.
My loving husband-to-be Camilo Phillips. You met me at my worst and kept by my side,
you brave man. Thank you for your patience and for not giving up; it is my turn now to show
you that it was worth it.
Finally, to my loving parents Luis Fernando and Amanda, my brothers Juan, Juango and
Sebas, my sister Paula, and my aunts and uncles. All I ever needed to get through these five
years was your unconditional love. I just need to look at myself through your eyes and I can do
anything, I can do it all. ¡Gracias totales!

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TABLE OF CONTENTS
CHAPTER 1. INTRODUCTION ................................................................................................................ 1
CHAPTER 2. GENERAL FRAMEWORK ................................................................................................ 4
2.1 NON-MARKET VALUATION TECHNIQUES ............................................................................................ 4
2.2 CHOICE EXPERIMENTS ......................................................................................................................... 5
2.3 STORMWATER MANAGEMENT IN URBAN AREAS ................................................................................ 9
2.3.1 Regulation and Policy ........................................................................................................................... 11
2.3.2 Barriers to LID implementation ........................................................................................................... 12
CHAPTER 3. VALUING PREFERENCES OVER STORMWATER- MANAGEMENT
OUTCOMES INCLUDING IMPROVED HYDROLOGIC FUNCTION .............................................. 14
3.1 INTRODUCTION ..................................................................................................................................... 14
3.2 RELATED ECONOMIC LITERATURE .................................................................................................... 16
3.3 METHODS .............................................................................................................................................. 18
3.3.1 Choice experiment technique ............................................................................................................... 18
3.3.2 Econometric methods ........................................................................................................................... 21
3.3.3 Survey design ....................................................................................................................................... 24
3.4 RESULTS ................................................................................................................................................ 28
3.5 CONCLUSION ........................................................................................................................................ 34
3.6 TABLES AND FIGURES .......................................................................................................................... 36
CHAPTER 4. EXPRESSING VALUE FOR ENVIRONMENTAL IMPROVEMENTS IN
TIME AND MONEY .................................................................................................................................... 44
4.1 INTRODUCTION ..................................................................................................................................... 44
4.2 ECONOMIC FRAMEWORK .................................................................................................................... 45
4.3 THEORY AND EMPIRICAL APPROACH ................................................................................................ 47
4.4 DATA ..................................................................................................................................................... 52
4.4.1 Survey design ....................................................................................................................................... 52
4.4.2 Experimental design ............................................................................................................................. 55
4.5 RESULTS ................................................................................................................................................ 56
4.6 CONCLUSION ........................................................................................................................................ 59
4.7 TABLES AND FIGURES........................................................................................................................... 61
CHAPTER 5. COMPARING PREFERENCES IN DIFFERENT URBAN AREAS ............................. 68
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5.1 INTRODUCTION ..................................................................................................................................... 68
5.2 ECONOMIC FRAMEWORK .................................................................................................................... 69
5.3 BACKGROUND ....................................................................................................................................... 70
5.3.1 City of Chicago..................................................................................................................................... 70
5.3.2 City of Portland .................................................................................................................................... 71
5.3.3 Comparison........................................................................................................................................... 72
5.4 DATA ..................................................................................................................................................... 73
5.5 EMPIRICAL APPROACH ........................................................................................................................ 74
5.6 RESULTS ................................................................................................................................................ 75
5.7 CONCLUSION ........................................................................................................................................ 78
5.8 TABLES .................................................................................................................................................. 79
CHAPTER 6. CONCLUSION ..................................................................................................................... 86
CHAPTER 7. REFERENCES ..................................................................................................................... 87
APPENDIX A. SAMPLE SURVEY FOR URBANA-CHAMPAIGN ...................................................... 96
APPENDIX B. SAMPLE SURVEY FOR CHICAGO-PORTLAND ....................................................... 105

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CHAPTER 1. INTRODUCTION
Choice experiment (CE) survey methodology has been widely used for decades in
marketing and economics to estimate consumers’ willingness to pay (WTP) for goods or services.
This approach asks respondents to choose between different hypothetical goods or scenarios
defined in terms of their attributes. In spite of the amount of published literature there are still a
lot of questions to be answered on how to approach the valuation of the benefits of
environmental goods and services. For my three-paper dissertation I conduct choice experiments
to evaluate people’s willingness to pay for improving environmental attributes, which will allow
me to contribute in extending the choice experiment methodology while answering empirical
questions regarding people’s preferences.
The first paper explores two different questions. First, I will assess what are the effects of
state-dependent preferences and heterogeneous status-quo situations on total WTP for a public
good that has variable benefit levels across space. Second, in the context of WTP for water
quality improvements, I add to the literature by answering whether or not people value the
hydrologic function of water bodies (non-use value) on top of water quality itself (use value).
In the second essay I explore the possibility of including time, or willingness to help, as
an additional way to express value and therefore an additional willingness to pay that could add
to the traditional monetary estimates. The monetary value of environmental amenities fails to
account for people who put a value on the environment but cannot afford or do not want to spend
money on it. By putting a value on the cost of time, I will be able to see how the inclusion of
time as a payment vehicle can change the monetary estimates of WTP and whether or not this is
a valid estimate of expressed value.
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