IDEAS home Printed from https://ideas.repec.org/a/eee/pubeco/v207y2022ics0047272722000020.html
   My bibliography  Save this article

A more comprehensive estimate of the value of water quality

Author

Listed:
  • Kuwayama, Yusuke
  • Olmstead, Sheila
  • Zheng, Jiameng

Abstract

The estimated marginal cost of U.S. water pollution control often exceeds its marginal benefit. We provide intuition, theory and empirical evidence suggesting that the hedonic property model—a common revealed-preference approach to valuing pollution control—may not capture water’s recreational benefits. Using the case of Tampa Bay, Florida, we estimate willingness to pay (WTP) for water quality improvements by combining a recreation demand model with a hedonic property model. Results indicate that homeowners have significant WTP for both local and regional recreational water quality improvements and suggest that prior hedonic studies may underestimate the benefits of water pollution control.

Suggested Citation

  • Kuwayama, Yusuke & Olmstead, Sheila & Zheng, Jiameng, 2022. "A more comprehensive estimate of the value of water quality," Journal of Public Economics, Elsevier, vol. 207(C).
    • Handle: RePEc:eee:pubeco:v:207:y:2022:i:c:s0047272722000020
    DOI: 10.1016/j.jpubeco.2022.104600
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0047272722000020
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jpubeco.2022.104600?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lucija Muehlenbachs & Elisheba Spiller & Christopher Timmins, 2015. "The Housing Market Impacts of Shale Gas Development," American Economic Review, American Economic Association, vol. 105(12), pages 3633-3659, December.
    2. Leggett, Christopher G. & Bockstael, Nancy E., 2000. "Evidence of the Effects of Water Quality on Residential Land Prices," Journal of Environmental Economics and Management, Elsevier, vol. 39(2), pages 121-144, March.
    3. Edward B. Barbier, 2012. "Progress and Challenges in Valuing Coastal and Marine Ecosystem Services," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 6(1), pages 1-19.
    4. d'Arge, Ralph C. & Shogren, Jason F., 1989. "Okoboji experiment: Comparing non-market valuation techniques in an unusually well-defined market for water quality," Ecological Economics, Elsevier, vol. 1(3), pages 251-259, October.
    5. Babatunde O. Abidoye & Joseph A. Herriges & Justin L. Tobias, 2012. "Controlling for Observed and Unobserved Site Characteristics in RUM Models of Recreation Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1070-1093.
    6. Kevin J. Boyle & P. Joan Poor & Laura O. Taylor, 1999. "Estimating the Demand for Protecting Freshwater Lakes from Eutrophication," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(5), pages 1118-1122.
    7. Donald J. Epp & K. S. Al-Ani, 1979. "The Effect of Water Quality on Rural Nonfarm Residential Property Values," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(3), pages 529-534.
    8. von Haefen, Roger H., 2003. "Incorporating observed choice into the construction of welfare measures from random utility models," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 145-165, March.
    9. Eid, Jean & Overman, Henry G. & Puga, Diego & Turner, Matthew A., 2008. "Fat city: Questioning the relationship between urban sprawl and obesity," Journal of Urban Economics, Elsevier, vol. 63(2), pages 385-404, March.
    10. Marshall Burke & Kyle Emerick, 2016. "Adaptation to Climate Change: Evidence from US Agriculture," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 106-140, August.
    11. Margaret Walls & Carolyn Kousky & Ziyan Chu, 2015. "Is What You See What You Get? The Value of Natural Landscape Views," Land Economics, University of Wisconsin Press, vol. 91(1), pages 1-19.
    12. Kling, Catherine L. & Bockstael, Nancy & Hanemann, W. Michael, 1987. "Estimating the Value of Water Quality Improvements in a Recreational Demand Framework," Staff General Research Papers Archive 1594, Iowa State University, Department of Economics.
    13. Wolf, David & Klaiber, H. Allen, 2017. "Bloom and bust: Toxic algae's impact on nearby property values," Ecological Economics, Elsevier, vol. 135(C), pages 209-221.
    14. Walsh, Patrick & Griffiths, Charles & Guignet, Dennis & Klemick, Heather, 2017. "Modeling the Property Price Impact of Water Quality in 14 Chesapeake Bay Counties," Ecological Economics, Elsevier, vol. 135(C), pages 103-113.
    15. Michael Greenstone & Justin Gallagher, 2008. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 951-1003.
    16. John K. Mullen & Fredric C. Menz, 1985. "The Effect of Acidification Damages on the Economic Value of the Adirondack Fishery to New York Anglers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 112-119.
    17. Nicolai V. Kuminoff & Jaren C. Pope, 2014. "Do “Capitalization Effects” For Public Goods Reveal The Public'S Willingness To Pay?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1227-1250, November.
    18. David A Keiser & Joseph S Shapiro, 2019. "Consequences of the Clean Water Act and the Demand for Water Quality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 349-396.
    19. Antonio Bento & Matthew Freedman & Corey Lang, 2015. "Who Benefits from Environmental Regulation? Evidence from the Clean Air Act Amendments," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 610-622, July.
    20. Patrick J. Walsh & J. Walter Milon & David O. Scrogin, 2011. "The Spatial Extent of Water Quality Benefits in Urban Housing Markets," Land Economics, University of Wisconsin Press, vol. 87(4), pages 628-644.
    21. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    22. Jake J. Beaulieu & Tonya DelSontro & John A. Downing, 2019. "Eutrophication will increase methane emissions from lakes and impoundments during the 21st century," Nature Communications, Nature, vol. 10(1), pages 1-5, December.
    23. Earnhart, Dietrich, 2004. "Regulatory factors shaping environmental performance at publicly-owned treatment plants," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 655-681, July.
    24. Charles D. Kolstad & Frances C. Moore, 2020. "Estimating the Economic Impacts of Climate Change Using Weather Observations," Review of Environmental Economics and Policy, University of Chicago Press, vol. 14(1), pages 1-24.
    25. S. S. Rabotyagov & C. L. Kling & P. W. Gassman & N. N. Rabalais & R. E. Turner, 2014. "The Economics of Dead Zones: Causes, Impacts, Policy Challenges, and a Model of the Gulf of Mexico Hypoxic Zone," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 58-79, January.
    26. Poor, P. Joan & Pessagno, Keri L. & Paul, Robert W., 2007. "Exploring the hedonic value of ambient water quality: A local watershed-based study," Ecological Economics, Elsevier, vol. 60(4), pages 797-806, February.
    27. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    28. David A. Keiser & Catherine L. Kling & Joseph S. Shapiro, 2019. "The low but uncertain measured benefits of US water quality policy," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 116(12), pages 5262-5269, March.
    29. Babatunde Abidoye & Joseph Herriges, 2012. "Model Uncertainty in Characterizing Recreation Demand," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 53(2), pages 251-277, October.
    30. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    31. Steinnes, Donald N, 1992. "Measuring the Economic Value of Water Quality: The Case of Lakeshore Land," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 26(2), pages 171-176, June.
    32. Palmquist, Raymond B., 1982. "Measuring environmental effects on property values without hedonic regressions," Journal of Urban Economics, Elsevier, vol. 11(3), pages 333-347, May.
    33. Stephen B. Billings, 2015. "Hedonic Amenity Valuation and Housing Renovations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(3), pages 652-682, September.
    34. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2012. "Temperature Shocks and Economic Growth: Evidence from the Last Half Century," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 66-95, July.
    35. Qiu, Yueming & Kahn, Matthew E., 2019. "Impact of voluntary green certification on building energy performance," Energy Economics, Elsevier, vol. 80(C), pages 461-475.
    36. Mendelsohn, Robert & Hellerstein, Daniel & Huguenin, Michael & Unsworth, Robert & Brazee, Richard, 1992. "Measuring hazardous waste damages with panel models," Journal of Environmental Economics and Management, Elsevier, vol. 22(3), pages 259-271, May.
    37. John A. Downing, 2009. "Valuing Water Quality as a Function of Water Quality Measures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 106-123.
    38. Matthew Blackwell & James Honaker & Gary King, 2017. "A Unified Approach to Measurement Error and Missing Data: Details and Extensions," Sociological Methods & Research, , vol. 46(3), pages 342-369, August.
    39. Dennis Guignet & Charles Griffiths & Heather Klemick & Patrick J. Walsh, 2017. "The Implicit Price of Aquatic Grasses," Marine Resource Economics, University of Chicago Press, vol. 32(1), pages 21-41.
    40. Daniel J. Phaneuf & Catherine L. Kling & Joseph A. Herriges, 2000. "Estimation and Welfare Calculations in a Generalized Corner Solution Model with an Application to Recreation Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 83-92, February.
    41. Gordon Kemp & João Santos Silva, 2016. "Partial effects in fixed-effects models," United Kingdom Stata Users' Group Meetings 2016 06, Stata Users Group.
    42. K. E. McConnell, 1990. "Double Counting in Hedonic and Travel Cost Models," Land Economics, University of Wisconsin Press, vol. 66(2), pages 121-127.
    43. Eric J. Horsch & David J. Lewis, 2009. "The Effects of Aquatic Invasive Species on Property Values: Evidence from a Quasi-Experiment," Land Economics, University of Wisconsin Press, vol. 85(3), pages 391-409.
    44. Klaus Moeltner & Roger von Haefen, 2011. "Microeconometric Strategies for Dealing with Unobservables and Endogenous Variables in Recreation Demand Models," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 375-396, October.
    45. Younjun Kim & Catherine L. Kling & Jinhua Zhao, 2015. "Understanding Behavioral Explanations of the WTP-WTA Divergence Through a Neoclassical Lens: Implications for Environmental Policy," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 169-187, October.
    46. Massey, D. Matthew & Newbold, Stephen C. & Gentner, Brad, 2006. "Valuing water quality changes using a bioeconomic model of a coastal recreational fishery," Journal of Environmental Economics and Management, Elsevier, vol. 52(1), pages 482-500, July.
    47. Charles A. Taylor & Hannah Druckenmiller, 2022. "Wetlands, Flooding, and the Clean Water Act," American Economic Review, American Economic Association, vol. 112(4), pages 1334-1363, April.
    48. Daniel J. Phaneuf, 2013. "Heterogeneity in Environmental Demand," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 227-244, June.
    49. Patrick Bajari & Jane Cooley Fruehwirth & Kyoo il Kim & Christopher Timmins, 2012. "A Rational Expectations Approach to Hedonic Price Regressions with Time-Varying Unobserved Product Attributes: The Price of Pollution," American Economic Review, American Economic Association, vol. 102(5), pages 1898-1926, August.
    50. V. Kerry Smith & William H. Desvousges & Ann Fisher, 1986. "A Comparison of Direct and Indirect Methods for Estimating Environmental Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 280-290.
    51. Zhang, Congwen & Boyle, Kevin J., 2010. "The effect of an aquatic invasive species (Eurasian watermilfoil) on lakefront property values," Ecological Economics, Elsevier, vol. 70(2), pages 394-404, December.
    52. Matthew Blackwell & James Honaker & Gary King, 2017. "A Unified Approach to Measurement Error and Missing Data: Overview and Applications," Sociological Methods & Research, , vol. 46(3), pages 303-341, August.
    53. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    54. Huang, Ju-Chin & Boyle, Kevin J. & Halstead, John M. & Gibbs, Julie P., 2002. "An Hedonic Analysis of the Effects of Lake Water Clarity on New Hampshire Lakefront Properties," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 31(1), pages 1-8, April.
    55. Daniel J. Phaneuf & V. Kerry Smith & Raymond B. Palmquist & Jaren C. Pope, 2008. "Integrating Property Value and Local Recreation Models to Value Ecosystem Services in Urban Watersheds," Land Economics, University of Wisconsin Press, vol. 84(3), pages 361-381.
    56. P. Joan Poor & Kevin J. Boyle & Laura O. Taylor & Roy Bouchard, 2001. "Objective versus Subjective Measures of Water Clarity in Hedonic Property Value Models," Land Economics, University of Wisconsin Press, vol. 77(4), pages 482-493.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ren, Qianping & West, Jeremy, 2023. "Cleaner waters and urbanization," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sarah Nicholls & John Crompton, 2018. "A Comprehensive Review of the Evidence of the Impact of Surface Water Quality on Property Values," Sustainability, MDPI, vol. 10(2), pages 1-30, February.
    2. Dennis Guignet & Matthew T. Heberling & Michael Papenfus & Olivia Griot, 2022. "Property Values, Water Quality, and Benefit Transfer: A Nationwide Meta-analysis," Land Economics, University of Wisconsin Press, vol. 98(2), pages 191-218.
    3. Liu, Hongxing & Gopalakrishnan, Sathya & Browning, Drew & Sivandran, Gajan, 2019. "Valuing water quality change using a coupled economic-hydrological model," Ecological Economics, Elsevier, vol. 161(C), pages 32-40.
    4. Tuttle, Carrie M. & Heintzelman, Martin D., 2015. "A loon on every lake: A hedonic analysis of lake water quality in the Adirondacks," Resource and Energy Economics, Elsevier, vol. 39(C), pages 1-15.
    5. Matthew T. Heberling & Dennis Guignet & Michael Papenfus, 2022. "Water Quality and Hedonic Models: A MetaAnalysis of Commodity, Market, and Methodological Characteristics," Working Papers 22-06, Department of Economics, Appalachian State University.
    6. Moore, Michael R. & Doubek, Jonathan P. & Xu, Hui & Cardinale, Bradley J., 2020. "Hedonic Price Estimates of Lake Water Quality: Valued Attribute, Instrumental Variables, and Ecological-Economic Benefits," Ecological Economics, Elsevier, vol. 176(C).
    7. Wolf, David & Klaiber, H. Allen & Gopalakrishnan, Sathya, 2022. "Beyond marginal: Estimating the demand for water quality," Resource and Energy Economics, Elsevier, vol. 68(C).
    8. Walsh, Patrick & Griffiths, Charles & Guignet, Dennis & Klemick, Heather, 2017. "Modeling the Property Price Impact of Water Quality in 14 Chesapeake Bay Counties," Ecological Economics, Elsevier, vol. 135(C), pages 103-113.
    9. Mahesh, Ramachandran, 2015. "Validating Spatial Hedonic Modeling with a Behavioral Approach: Measuring the Impact of Water Quality Degradation on Coastal Housing Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205664, Agricultural and Applied Economics Association.
    10. Okmyung Bin & Jeffrey Czajkowski & Jingyuan Li & Gabriele Villarini, 2017. "Housing Market Fluctuations and the Implicit Price of Water Quality: Empirical Evidence from a South Florida Housing Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(2), pages 319-341, October.
    11. Ge, Jiaqi, 2014. "Stepping into new territory: Three essays on agent-based computational economics and environmental economics," ISU General Staff Papers 201401010800004899, Iowa State University, Department of Economics.
    12. Irwin, Nicholas & Wolf, David, 2022. "Time is money: Water quality's impact on home liquidity and property values," Ecological Economics, Elsevier, vol. 199(C).
    13. Zhang, Jiarui & Phaneuf, Daniel J. & Schaeffer, Blake A., 2022. "Property values and cyanobacterial algal blooms: Evidence from satellite monitoring of Inland Lakes," Ecological Economics, Elsevier, vol. 199(C).
    14. Patrick J. Walsh & J. Walter Milon & David O. Scrogin, 2011. "The Spatial Extent of Water Quality Benefits in Urban Housing Markets," Land Economics, University of Wisconsin Press, vol. 87(4), pages 628-644.
    15. Wolf, David & Klaiber, H. Allen, 2017. "Bloom and bust: Toxic algae's impact on nearby property values," Ecological Economics, Elsevier, vol. 135(C), pages 209-221.
    16. David A. Keiser, 2018. "The Missing Benefits of Clean Water and the Role of Mismeasured Pollution," Center for Agricultural and Rural Development (CARD) Publications 18-wp581, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    17. Ge, Jiaqi & Kling, Catherine L. & Herriges, Joseph A., 2013. "How much is clean water worth? Valuing water quality improvement using a meta analysis," ISU General Staff Papers 201302250800001050, Iowa State University, Department of Economics.
    18. David Wolf & Sathya Gopalakrishnan & H. Allen Klaiber, 2022. "Staying afloat: The effect of algae contamination on Lake Erie housing prices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(5), pages 1701-1723, October.
    19. Patrick J. Walsh & J. Walter Milon, 2016. "Nutrient Standards, Water Quality Indicators, and Economic Benefits from Water Quality Regulations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 643-661, August.
    20. Ann Hodgkinson & Abbas Valadkhani, 2009. "Community Valuations of Environmental Quality in Coastal Lakes: Lake Illawarra Case Study," Economic Papers, The Economic Society of Australia, vol. 28(2), pages 155-168, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pubeco:v:207:y:2022:i:c:s0047272722000020. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505578 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.