provided excellent research assistance. The National Science Foundation (SES-0922340) and the Cen... more provided excellent research assistance. The National Science Foundation (SES-0922340) and the Center for Local, State, and Urban Policy (CLOSUP) provided generous financial assistance. Any mistakes are my own. Please e-mail any questions or comments to [email protected]. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
of the USDA Soil Conservation Service and Amy Purvis also provided useful comments on drafts of t... more of the USDA Soil Conservation Service and Amy Purvis also provided useful comments on drafts of the report. CHAPTER 1 THE OFF FARM BENEFITS OF SOIL EROSION CONTROL Soil erosion on agricultural land has consequences both on and off the farm. On-farm effects include reduced soil productivity, crop damage and clogged agricultural drains. Surface water runoff also carries eroded soil off the farm. Organic matter, nutrients and agricultural chemicals move with the eroded soil. This agricultural pollution has significant off-farm impacts on streams, rivers, and lakes. Eroded soil in agricultural runoff affects aquatic environments, recreation, water treatment, navigation, and other water uses. Recent studies suggest that soil eroded from agricultural land may be the chief obstacle to improved water quality in many streams and rivers (Clark, Haverkamp and Chapman, 1985). Effective control of agricultural erosion can result in improved water quality and substantial benef~ts to those who use water resources. Fisherme~ may find their fishing opportunities enhanced by greater numbers of fish and more pleasing natural environments. Municipal and industrial water facilities may face lower treatment costs in making surface water suitable for use. Reduced sedimentation in shipping channels, water storage facilities, and drainage and irrigation ditches lowers dredging costs required to maintain these facilities. Many individuals also benefit merely from the knowledge that cleaner _ water exists (Randall, 1987). The economic impacts of agri cul tura 1 so i1 erasion contra 1 are 1 arge.
Michigan's water resources are an important input into a range of residential, agricultural, ... more Michigan's water resources are an important input into a range of residential, agricultural, recreational, and commercial activities. One way to quantify the tradeoffs involved in water-quality management is to measure the economic value of water resources to the various interests involved. The primary objective of the study was to contribute to the development of information and procedures for assessing the economic value of Michigan's water resources. Given the existing policy demands and the generic nature of economic valuation procedures, the study focused on the management tradeoffs involving groundwater resources.
Con s ume r Persp ectives on Food Safety Iss u es: The c a se of P est i c ide Residu es i n Fres... more Con s ume r Persp ectives on Food Safety Iss u es: The c a se of P est i c ide Residu es i n Fresh Produce 1 ~-fzc# rfap-uF):epf. 6} ~. £~ G' V1_j Eileen o. van Ravenswaay,jMichigan State University 2 John P. Hoehn, Michigan State University 3 This paper reviews three approaches to estimating consumer willingness to pay for reductions in food-borne risks. Contingent valuation methods compare favorably to marketbased methods. Significant price premia for food safety improvements are found, regardless of the amount of food risk perceived by consumer s. This finding suggests that uncertainty rather than risk perceptions may drive willingness to pay. Policy implications of this finding are developed.
This paper examines the effect of ambiguity about health risks on consumers' willingness to pay f... more This paper examines the effect of ambiguity about health risks on consumers' willingness to pay for reduced pesticide residues in food. A theory of consumer choice in a hypothetical market for regular and reduced-residue apples is developed using Segal's ambiguity version of Quiggin's rank-dependent expected utility model. Survey data on consumer purchase intentions in this market and perceptions of risk and ambiguity are used to estimate demand. Willingness to pay for reduced pesticide residues on apples is calculated using Hellerstein's measure of expected consumer surplus. The effect of changing perceptions of risk and ambiguity is calculated via simulation. Implications for policy and future research are developed.
~any environmental proposals affect the quality of several natural resources within the same geog... more ~any environmental proposals affect the quality of several natural resources within the same geographic area. If households view these resources as substitutes (complements), independent valuation of the components of policy overstates (understates) the valid measure of total benefits. This paper derives a theoretical framework for understanding substitution effects be~een environmental programs. A multiple program valuation function is specified and its structure analyzed. A maximum likelihood estimator is derived to estimate the parameters of the valuation function using referendumtype, contingent valuation data. The empirical analysis shows that the conventi9nal benefit aggregation approach of independent valuation and summation overstates the benefits of two-and three-program policies by an average of 24 and 54 percent, respectively J
The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regressi... more The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regression analyses have shown CVM results to be systematically related to individual demographic characteristics and generally consistent with preferences revealed by actual market choices (Tolley, et al.). Direct comparisons of CVM results with market demand based measures are less conclusive. Such comparisons typically reveal more about the variability of the demand based method than about the performance of CVM. Additionally, relatively few coherent concepts have been available to guide empirical research and testing. The objective of this paper is an improved comparison of CVM and market based valuations. As a first step, previous empirical analyses are briefly reviewed and highlighted by recent conceptual results. Second, the valuation context is considered. Recent travel demand research is combined with Maler's notion of weak complementarity to derive a surprisingly simple, market based measure of site specific surplus. Third, the contingent valuation experiment is described. Because both the travel demand approach and the CVM experiment yield both variances as well as means, the comparison of surplus measures can be based upon standard . statistical tests rather than on simple comparisons of absolute values. Previous studies have had some difficulty in designing a direct comparison between the CVM and demand based techniques. More often than not, a given valuationcontext lends itself to either a demand based technique or the CVM but not both. Nevertheless, two types of market based comparisons have been made: (1) those 1 based on the travel cost technique and (2) those using the hedonic approach.
This report examines optimum supply formula (OSF) in the tart cherry industry. The OSF is a tool ... more This report examines optimum supply formula (OSF) in the tart cherry industry. The OSF is a tool for stabilizing market prices as authorized by a federal market order (FMO). The current OSF sets the optimum supply volume (OSV), or free sales of tart cherries in a given harvest year equal to the average sales of the three prior years plus 10 percent. This report evaluates the current OSF relative to several alternative formulations. The analysis reviews data to identify sources of market stability, analyzes the demands for tart cherries and compares the current OSF to the alternatives.
Identification and estimation of multinomial probit models are examined for recreation demand wit... more Identification and estimation of multinomial probit models are examined for recreation demand with a large number of choices. Two logit and three probi t models are estimated and ILi\. restrictions, site substitution patterns, trip prediction, and welfare estimation are investigated using a range of policy scenarios. Assumptions about the error distribution of a model are shown to be important.
We estimate the value of time under institutional constraints on labor supply. We compare the mod... more We estimate the value of time under institutional constraints on labor supply. We compare the model to a wage regression that ignores the constraints. Predicted time values are not significantly different from predicted wages, which is consistent with Larson's theory and supports using wages to value time in recreational demand equations.
provided excellent research assistance. The National Science Foundation (SES-0922340) and the Cen... more provided excellent research assistance. The National Science Foundation (SES-0922340) and the Center for Local, State, and Urban Policy (CLOSUP) provided generous financial assistance. Any mistakes are my own. Please e-mail any questions or comments to [email protected]. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
of the USDA Soil Conservation Service and Amy Purvis also provided useful comments on drafts of t... more of the USDA Soil Conservation Service and Amy Purvis also provided useful comments on drafts of the report. CHAPTER 1 THE OFF FARM BENEFITS OF SOIL EROSION CONTROL Soil erosion on agricultural land has consequences both on and off the farm. On-farm effects include reduced soil productivity, crop damage and clogged agricultural drains. Surface water runoff also carries eroded soil off the farm. Organic matter, nutrients and agricultural chemicals move with the eroded soil. This agricultural pollution has significant off-farm impacts on streams, rivers, and lakes. Eroded soil in agricultural runoff affects aquatic environments, recreation, water treatment, navigation, and other water uses. Recent studies suggest that soil eroded from agricultural land may be the chief obstacle to improved water quality in many streams and rivers (Clark, Haverkamp and Chapman, 1985). Effective control of agricultural erosion can result in improved water quality and substantial benef~ts to those who use water resources. Fisherme~ may find their fishing opportunities enhanced by greater numbers of fish and more pleasing natural environments. Municipal and industrial water facilities may face lower treatment costs in making surface water suitable for use. Reduced sedimentation in shipping channels, water storage facilities, and drainage and irrigation ditches lowers dredging costs required to maintain these facilities. Many individuals also benefit merely from the knowledge that cleaner _ water exists (Randall, 1987). The economic impacts of agri cul tura 1 so i1 erasion contra 1 are 1 arge.
Michigan's water resources are an important input into a range of residential, agricultural, ... more Michigan's water resources are an important input into a range of residential, agricultural, recreational, and commercial activities. One way to quantify the tradeoffs involved in water-quality management is to measure the economic value of water resources to the various interests involved. The primary objective of the study was to contribute to the development of information and procedures for assessing the economic value of Michigan's water resources. Given the existing policy demands and the generic nature of economic valuation procedures, the study focused on the management tradeoffs involving groundwater resources.
Con s ume r Persp ectives on Food Safety Iss u es: The c a se of P est i c ide Residu es i n Fres... more Con s ume r Persp ectives on Food Safety Iss u es: The c a se of P est i c ide Residu es i n Fresh Produce 1 ~-fzc# rfap-uF):epf. 6} ~. £~ G' V1_j Eileen o. van Ravenswaay,jMichigan State University 2 John P. Hoehn, Michigan State University 3 This paper reviews three approaches to estimating consumer willingness to pay for reductions in food-borne risks. Contingent valuation methods compare favorably to marketbased methods. Significant price premia for food safety improvements are found, regardless of the amount of food risk perceived by consumer s. This finding suggests that uncertainty rather than risk perceptions may drive willingness to pay. Policy implications of this finding are developed.
This paper examines the effect of ambiguity about health risks on consumers' willingness to pay f... more This paper examines the effect of ambiguity about health risks on consumers' willingness to pay for reduced pesticide residues in food. A theory of consumer choice in a hypothetical market for regular and reduced-residue apples is developed using Segal's ambiguity version of Quiggin's rank-dependent expected utility model. Survey data on consumer purchase intentions in this market and perceptions of risk and ambiguity are used to estimate demand. Willingness to pay for reduced pesticide residues on apples is calculated using Hellerstein's measure of expected consumer surplus. The effect of changing perceptions of risk and ambiguity is calculated via simulation. Implications for policy and future research are developed.
~any environmental proposals affect the quality of several natural resources within the same geog... more ~any environmental proposals affect the quality of several natural resources within the same geographic area. If households view these resources as substitutes (complements), independent valuation of the components of policy overstates (understates) the valid measure of total benefits. This paper derives a theoretical framework for understanding substitution effects be~een environmental programs. A multiple program valuation function is specified and its structure analyzed. A maximum likelihood estimator is derived to estimate the parameters of the valuation function using referendumtype, contingent valuation data. The empirical analysis shows that the conventi9nal benefit aggregation approach of independent valuation and summation overstates the benefits of two-and three-program policies by an average of 24 and 54 percent, respectively J
The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regressi... more The reliability of the contingent valuation method (CVM) has proven difficult to assess. Regression analyses have shown CVM results to be systematically related to individual demographic characteristics and generally consistent with preferences revealed by actual market choices (Tolley, et al.). Direct comparisons of CVM results with market demand based measures are less conclusive. Such comparisons typically reveal more about the variability of the demand based method than about the performance of CVM. Additionally, relatively few coherent concepts have been available to guide empirical research and testing. The objective of this paper is an improved comparison of CVM and market based valuations. As a first step, previous empirical analyses are briefly reviewed and highlighted by recent conceptual results. Second, the valuation context is considered. Recent travel demand research is combined with Maler's notion of weak complementarity to derive a surprisingly simple, market based measure of site specific surplus. Third, the contingent valuation experiment is described. Because both the travel demand approach and the CVM experiment yield both variances as well as means, the comparison of surplus measures can be based upon standard . statistical tests rather than on simple comparisons of absolute values. Previous studies have had some difficulty in designing a direct comparison between the CVM and demand based techniques. More often than not, a given valuationcontext lends itself to either a demand based technique or the CVM but not both. Nevertheless, two types of market based comparisons have been made: (1) those 1 based on the travel cost technique and (2) those using the hedonic approach.
This report examines optimum supply formula (OSF) in the tart cherry industry. The OSF is a tool ... more This report examines optimum supply formula (OSF) in the tart cherry industry. The OSF is a tool for stabilizing market prices as authorized by a federal market order (FMO). The current OSF sets the optimum supply volume (OSV), or free sales of tart cherries in a given harvest year equal to the average sales of the three prior years plus 10 percent. This report evaluates the current OSF relative to several alternative formulations. The analysis reviews data to identify sources of market stability, analyzes the demands for tart cherries and compares the current OSF to the alternatives.
Identification and estimation of multinomial probit models are examined for recreation demand wit... more Identification and estimation of multinomial probit models are examined for recreation demand with a large number of choices. Two logit and three probi t models are estimated and ILi\. restrictions, site substitution patterns, trip prediction, and welfare estimation are investigated using a range of policy scenarios. Assumptions about the error distribution of a model are shown to be important.
We estimate the value of time under institutional constraints on labor supply. We compare the mod... more We estimate the value of time under institutional constraints on labor supply. We compare the model to a wage regression that ignores the constraints. Predicted time values are not significantly different from predicted wages, which is consistent with Larson's theory and supports using wages to value time in recreational demand equations.
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