Valuing Environmental Amenities Using Stated Choice Studies (The Economics of Non-Market Goods and Resources)

344 Pages·2006·8.01 MB·English

by  Barbara J. Kanninen

VALUINGENVIRONMENTALAMENITIES
USINGSTATEDCHOICESTUDIES
THE ECONOMICS OF NON-MARKETGOODS AND RESOURCES
VOLUME8
Series Editor: Dr. Ian J. Bateman
Dr. Ian J. Bateman is Professor of Environmental Economics at the School of
Environmental Sciences, University of East Anglia (UEA) and directs the research
theme Innovation in Decision Support (Tools and Methods) within the Programme on
Environmental Decision Making (PEDM) at the Centre for Social and Economic
Research on the Global Environment (CSERGE), UEA. The PEDM is funded by the UK
Economic and Social Research Council. Professor Bateman is also a member of the
Centre for the Economic and Behavioural Analysis of Risk and Decision (CEBARD) at
UEAand Executive Editor of Environmental and Resource Economics, an international
journal published in cooperation with the European Association of Environmental and
Resource Economists. (EAERE).
Aims and Scope
The volumes which comprise The Economics of Non-Market Goods and Resources
series have been specially commissioned to bring a new perspective to the greatest
st
economic challenge facing society in the 21 Century; the successful incorporation of
non-market goods within economic decision making. Only by addressing the
complexity of the underlying issues raised by such a task can society hope to redirect
global economies onto paths of sustainable development. To this end the series
combines and contrasts perspectives from environmental, ecological and resource
economics and contains a variety of volumes which will appeal to students, researchers,
and decision makers at a range of expertise levels. The series will initially address two
themes, the first examining the ways in which economists assess the value of non-
market goods, the second looking at approaches to the sustainable use and management
of such goods. These will be supplemented with further texts examining the
fundamental theoretical and applied problems raised by public good decision making.
For further information about the series and how to order, please visit our Website
www.springer.com
Valuing Environmental Amenities
Using Stated Choice Studies
A Common Sense Approach to Theory and Practice
Editedby
Barbara J. Kanninen
Arlington,Virginia,USA
AC.I.P.CataloguerecordforthisbookisavailablefromtheLibraryofCongress.
ISBN-101-4020-4064-4(HB)
ISBN-13978-1-4020-4064-1(HB)
ISBN-101-4020-5313-4(e-book)
ISBN-13978-1-4020-5313-9(e-book)
PublishedbySpringer,
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©2006Springer
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TABLE OF CONTENTS
Contributing Authors vii
Preface ix
Ackkknowledgements xiii
1. Getting Started 1
by Carol Mansfield and Subhrendu Pattanayak
2. Survey Methodologies for Stated Choice Studies 21
by Patricia A. Champ and Michael P. Welsh
3. Supporting Questions in Stated Choice Studies 43
by AlanKrupnick and W.L. (Vic)Adddamowicz
4. Making Choice Studies Incentive Compatible 67
by Glenn W. Harrison
5. How and How Much? The Role of Information in Stated Choice 111
Questionnaires
by Kristy E. Mathews, Miranda L. Freeman
and William HH.. Desvousges
6. Attribute Processing in Choice Experiments and Implications on 135
Willingness to Pay
by David A. Hensher
7. Experimental Design for Stated Choice Studies 159
by F. Reed Johnson, Barbara Kanninen, Matthew Bingham
and Semra Özdemir
8. Basic Statistical Models for Stated Choice Studies 203
by Anna Alberini, Alberto Longo and Marcella Veronesi
9. Advanced Choice Models 229
by Joffre Swait
10. Computer Software to Estimate Choice Models 295
by Daniel Hellerstein
11. Judging Quality 297
by V. Kerry Smith
Index 335
v
CONTRIBUTING AUTHORS
W.L. (Vic) Adamowicz, Canada Research Chair and Professor, Department of Rural
Economy, University of Alberta, Edmonton, Alberta, Canada T6G 2H1, email:
[email protected].
Anna Alberini, Associate Professor, Department of Agricultural and Resource
Economics, University of Maryland, College Park, MD, U.S.A. and Fondazione ENI
Enrico Mattei, e-mail: [email protected].
Matthew Bingham, Principal Economist, Veritas Economic Consulting, LLC, 1851
Evans Road, Cary, NC 27513, USA., e-mail: [email protected].
Patricia Champ, Economist, U.S. Forest Service, Rocky Mountain Research Station,
2150 Centre Ave., Bldg A, Fort Collins, CO 80526, U.S.A., e-mail:
[email protected].
William H. Desvousges, President, W.H. Desvousges & Associates, Inc., 7824
Harps Mill Road, Raleigh, NC 27615, U.S.A., e-mail: [email protected].
Miranda L. Freeman, Triangle Economic Research, 11000 Regency Parkway, West
Tower, Suite 205, Cary, NC 27511-8518, U.S.A., e-mail: [email protected].
Glenn W. Harrison, Professor of Economics, Department of Economics, College of
Business Administration, University of Central Florida, Orlando, FL, 32816-1400,
U.S.A., e-mail: [email protected].
Daniel Hellerstein, e-mail: [email protected].
David A. Hensher, Institute of Transport and Logistics Studies, School of Business,
Faculty of Economics and Business, The University of Sydney, Australia, e-mail:
[email protected].
F. Reed Johnson, Principal Economist and RTI Fellow, RTI International, 3040
Cornwallis Road, P.O. Box 12194, Research Triangle Park, NC, 27709-2194,
U.S.A., e-mail: [email protected].
Barbara Kanninen, e-mail: [email protected], URL: www.barbarakanninen.com.
Alan Krupnick, Senior Fellow and Director, Quality of the Environment Division,
Resources for the Future, 1616 P Street N., Washington, D.C. 20036, U.S.A., e-mail:
[email protected].
vii
viiiiii CONTRIBUTINGAUTHORS
Alberto Longo, University of Bath, Bath, UK, e-mail: [email protected].
Carol Mansfield, RTI International, 3040 Cornwallis Road, P.O. Box 12194,
Research Triangle Park, NC, 27709-2194, U.S.A., e-mail: [email protected].
Kristy E. Mathews, Principal Economist, Veritas Economic Consulting, LLC, 1851
Evans Road, Cary, NC 27513, USA., e-mail: [email protected].
Semra Özdemir, Research Health Economist, RTI International, 3040 Cornwallis
Road, P.O. Box 12194, Research Triangle Park, NC, 27709-2194, U.S.A., e-mail:
[email protected].
Subhrendu Pattanayak, RTI Fellow and Senior Economist, RTI International, 3040
Cornwallis Road, P.O. Box 12194, Research Triangle Park, NC, 27709-2194,
U.S.A., e-mail: [email protected].
V. Kerry Smith, W.P. Carey Professor of Economics, Arizona State University,
Tempe, Arizona, U.S.A.
Joffre Swait, Partner, Advanis Inc., Suite 1600, Sun Life Place, 10123 99th Street,
Edmonton, Alberta T5J 3H1, Canada, email: [email protected], URL:
http://www.swaitworld.org/
Marcella Veronesi, Department of Agricultural and Resource Economics, University
of Maryland, College Park, MD, U.S.A., e-mail: [email protected].
Michael P. Welsh, Senior Economist, Christensen Associates, 4610 University
Avenue, Suite 700, Madison, WI 53705, U.S.A., e-mail: [email protected].
PREFACE
When I was a graduate student, I fell in love with choice models. After years
studying the econometrics of the standard linear model, discrete choice offered so
many new, cool twists. With contingent valuation (CV) studies abounding, data was
plentiful and varied. Every CV dataset had its own kinks and quirks that begged to
be addressed through innovative modeling techniques. Dissertation topics were not
scarce.
We economists like to assume. There are jokes written about this. My
assumption, as I slaved over the statistical properties of the double-bounded CV
model, was that CV data was good data, representing valid economic choices made
by survey respondents. Before I received my Ph.D., this assumption was called into
question big time.
In 1989, the Exxon-Valdez oil tanker spilled 11 million gallons of oil into Prince
William Sound, Alaska. The accident killed a lot of birds, devastated fisheries,
harmed area economies and ruined a reputation or two. It also changed the field of
environmental valuation. What was once a research field dominated by
environmental economists interested in obtaining nonmarket values for
environmental amenities was now a legal battleground pitting environmental
economists against “traditional” economists who were skeptical of the techniques
and procedures used with CV. If Nobel prizes are indicators of quality – and I’m
fairly certain they are – the Exxon-Valdez oil spill drew the best and the brightest to
scrutinize our field.
I mention the Exxon-Valdez not because it sets the agenda for this book, but
because without that event, this book might not be. As suggested above, the scrutiny
inspired by the Exxon-Valdez shook down the field of environmental valuation and
forced economists like me to ask ourselves about the quality of our data. In a sense,
all the questions boil down to this one: are the data meaningful? By now, I think we
have concluded that the answer is yes, at least when a study is well-designed and
well-executed.
This book is not about natural resource damage assessment. Though large legal
cases do go on with millions of dollars invested, most environmental economists
today find themselves working on relatively smaller questions: is it worth the effort
to reduce the smog that obscures scenic vistas of the Grand Canyon? Should we
allow snowmobilers to ride through Yellowstone National Park? Should a small
village in Central America invest in a clean water system? Of course, many of these
questions are not small at all. What are often small are the budgets for the studies,
and that is what this book is about: doing high quality studies on (possibly) low
budgets, principally for benefit-cost analysis.
High quality valuation studies require high quality effort and care on a wide array
of topics from survey design and methodology to econometric modeling to policy
interpretation. It is, truly, impossible for someone to become expert in all of these
areas. My hope is that this book will provide researchers with a solid summary of
state-of-the-art techniques, covering all the basic issues necessary for developing and
implementing a good valuation study.
ix
x PREFACEE
The issue is this. We, humans, care about a lot of things that are not bought or
sold in the marketplace. We care about our families, our neighbors, our world; and
the interconnectedness of our world means that we even care about things we no
nothing or very little about. Yet things go on every day that may be affecting our
interests: over-fishing, over-hunting, over-grazing, over-developing, over-polluting,
to name a few. Many of these activities occur on scales so large that they can only be
dealt with by corporate decision-making or government policy-making, and that
means that if we want good decisions and good policies to be made, we need solid
information about the benefits and costs of these activities. Nonmarket valuation
studies are our attempt to obtain that solid information.
We conduct nonmarket valuation studies when we have no means of obtaining
standard, market information. Much of our natural world fits into this category. We
do not buy or sell the ivory-billed woodpecker or the beauty of Acadia National
Park. We do not buy or sell clean air. But these are “goods” that people care about
and hold values for. In the absence of markets (such as real estate or travel, for
example), the only way we economists have found to learn about these values is to
ask people about them. This approach has come to be known as stated choice or
stated preference.
This book focuses on the practice of conducting stated choice studies, looking at
the entire process from start to finish. Within the discussion, a lot of theory is
covered, but the book is meant to be, first and foremost, a practical guide. It begins
at the beginning: when researchers start to think about a problem and plan their
study.
In chapter 1, Carol Mansfield and Subhrendu Pattanayak provide a thorough and
rather handy explanation of how they have gone about planning their own stated-
choice studies. This is the kind of information that usually gets left out of journal
articles and theory books. Good planning is a fundamental part of a good study.
In Chapter 2, Patty Champ and Michael Welsh provide a summary of survey
methodology issues and approaches. Survey techniques seem to be changing before
our eyes as computer assisted technologies and internet-based approaches
proliferate. Champ and Welsh summarize pretty much everything that is out there
right now and what the trade-offs are in terms of cost, sample size and sample
selection. This is a field to keep close watch on, though, as it may be changing even
as this book goes to press.
Beginning in Chapter 3, the book moves into issues with writing the survey. One
of the general concerns I have when it comes to surveys is respect for our
respondents’ time. It is terrific that so many people continue to be willing to respond
to surveys, but we should not take our subjects’ generosity for granted. We should
do all we can to minimize the amount of time it takes for people to respond. We can
do this by careful planning: cutting questions we do not need to use for later analysis
and framing questions in the most appropriate manner to obtain the most useful
information possible. To this end, Alan Krupnick and Vic Adamowicz have
provided an innovative chapter that discusses what they call “supporting questions,”
that is, all the questions that are not directly focused on obtaining choice or
willingness to pay information. In many studies, supporting questions take up most