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Valuing Environmental Resources through Demand for Related Commodities

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  • Ju-Chin Huang
  • Daigee Shaw
  • Yu-Lan Chien
  • Min Qiang Zhao

Abstract

We examine the revealed preference theory underlying the welfare analysis of public goods (e.g., environmental quality) by observing the consumption of related commodities. Inspired by Larson (1991) and Ebert (1998), and extended from Eom and Larson (2006), an empirical strategy is formulated, consistent with the theory of uniquely deriving use and nonuse values for a change in the public good. We show that the weak complementarity assumption and the Willig condition, the common preference assumptions used to support the revealed preference methods for non-market valuation, may be tested as parameter restrictions. A study of water quality valuation is presented to illustrate the proposed empirical strategy. Results show that the weak complementarity assumption and the Willig condition generally do not hold in the case study, and the consumer surplus derived from the indirect valuation method deviates largely from the exact welfare measures.

Suggested Citation

  • Ju-Chin Huang & Daigee Shaw & Yu-Lan Chien & Min Qiang Zhao, 2016. "Valuing Environmental Resources through Demand for Related Commodities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(1), pages 231-253.
    • Handle: RePEc:oup:ajagec:v:98:y:2016:i:1:p:231-253.
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    File URL: http://hdl.handle.net/10.1093/ajae/aav053
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    Cited by:

    1. Landry, Craig E. & Shonkwiler, J. Scott & Whitehead, John C., 2020. "Economic Values of Coastal Erosion Management: Joint Estimation of Use and Existence Values with recreation demand and contingent valuation data," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    2. Zhang, Nan & Mendelsohn, Robert & Shaw, Daigee, 2023. "How to Identify and Estimate the Demand for Job Safety?," MPRA Paper 118594, University Library of Munich, Germany.
    3. Voltaire, Louinord, 2017. "Pricing Future Nature Reserves Through Contingent Valuation Data," Ecological Economics, Elsevier, vol. 135(C), pages 66-75.
    4. Voltaire, Louinord & Donfouet, Hermann Pythagore Pierre & Pirrone, Claudio & Larzillière, Agathe, 2017. "Respondent Uncertainty and Ordering Effect on Willingness to Pay for Salt Marsh Conservation in the Brest Roadstead (France)," Ecological Economics, Elsevier, vol. 137(C), pages 47-55.
    5. Paul Hindsley & Craig E. Landry & Kurt Schnier & John C. Whitehead & Mohammadreza Zarei, 2021. "Joint Estimation of Revealed Preference Site Selection and Stated Preference Choice Experiment Recreation Data Considering Attribute NonAttendance," Working Papers 21-10, Department of Economics, Appalachian State University.

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