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Private Options to Use Public Goods: Exploiting Revealed Preferences to Estimate Environmental Benefits

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  • Snyder, Lori

    (Harvard U)

  • Stavins, Robert

    (Harvard U and Resources for the Future)

  • Wagner, Alexander

    (Harvard U)

Abstract

We develop and apply a new method for estimating the economic benefits of an environmental amenity. The method fits within the household production framework (Becker 1965), and is based upon the notion of estimating the derived demand for a privately traded option to utilize a freely-available public good. In particular, the demand for state fishing licenses is used to infer the benefits of recreational fishing. Using panel data on state fishing license sales and prices for the continental United States over a fifteen-year period, combined with data on substitute prices and demographic variables, a license demand function is estimated with instrumental variable procedures to allow for the potential endogeneity of administered prices. The econometric results lead to estimates of the benefits of a fishing license, and subsequently to the expected benefits of a recreational fishing day. In contrast with previous studies, which have utilized travel cost or hypothetical market methods, our approach provides estimates that are directly comparable across geographic areas. Further, our results suggest that the benefits of recreational fishing days are generally less than previously estimated.

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Bibliographic Info

Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp03-013.

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Date of creation: Mar 2003
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Handle: RePEc:ecl:harjfk:rwp03-013

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  1. W. Michael Hanemann, 1994. "Valuing the Environment through Contingent Valuation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 19-43, Fall.
  2. Richard T. Carson & Nicholas E. Flores & Kerry M. Martin & Jennifer L. Wright, 1996. "Contingent Valuation and Revealed Preference Methodologies: Comparing the Estimates for Quasi-Public Goods," Land Economics, University of Wisconsin Press, vol. 72(1), pages 80-99.
  3. Douglas M. Larson, 1993. "Joint Recreation Choices and Implied Values of Time," Land Economics, University of Wisconsin Press, vol. 69(3), pages 270-286.
  4. Paul R. Portney, 1994. "The Contingent Valuation Debate: Why Economists Should Care," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 3-17, Fall.
  5. Bockstael, Nancy E & McConnell, Kenneth E, 1983. "Welfare Measurement in the Household Production Framework," American Economic Review, American Economic Association, vol. 73(4), pages 806-14, September.
  6. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
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Cited by:
  1. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future.

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