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Valuing Groundwater Quality: Does Averting Behavior Matter?

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  • Melo, Grace

Abstract

Contingent valuation (CV) or defensive behavior data is often used to estimate the economic value of water quality. Although combining these data (i.e., stated and revealed preferences) mitigates the potential bias from using either type of information, the costs of collecting both could overwhelm the benefits. We attempt to find a convenient estimation method by using a proxy indicator for revealed preferences in the analysis of stated preference data. Specifically, this study explores the effect of individuals’ reported defensive behavior on their stated preferences for groundwater quality. Logit models based on random utility theory were estimated using referendum CV data at household level collected in Maine, US. The results suggest that failure in accounting for defensive behavior in the valuation could result in a bias willingness to pay estimate for groundwater quality. We also found that the monetary value for groundwater quality was small, even though subsoil water constituted an important drinking water supply in the survey period. The results also revealed that respondents’ averting behavior were mainly influenced by their perception of groundwater quality. Implications of our findings for welfare analysis are discussed.

Suggested Citation

  • Melo, Grace, 2016. "Valuing Groundwater Quality: Does Averting Behavior Matter?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230001, Southern Agricultural Economics Association.
  • Handle: RePEc:ags:saea16:230001
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    1. Bryan J. Hubbell & Jeffrey L. Jordan, 2000. "Joint Production and Averting Expenditure Measures of Willingness to Pay: Do Water Expenditures Really Measure Avoidance Costs?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 427-437.
    2. Charles W. Abdalla, 1994. "Groundwater Values from Avoidance Cost Studies: Implications for Policy and Future Research," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(5), pages 1062-1067.
    3. 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.
    4. Gregory Poe & Richard Bishop, 1999. "Valuing the Incremental Benefits of Groundwater Protection when Exposure Levels are Known," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(3), pages 341-367, April.
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    7. Mi-Jung Um & Seung-Jun Kwak & Tai-Yoo Kim, 2002. "Estimating Willingness to Pay for Improved Drinking Water Quality Using Averting Behavior Method with Perception Measure," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(3), pages 285-300, March.
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    11. John Whitehead, 2005. "Environmental Risk and Averting Behavior: Predictive Validity of Jointly Estimated Revealed and Stated Behavior Data," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(3), pages 301-316, November.
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    14. Charles W. Abdalla & Brian A. Roach & Donald J. Epp, 1992. "Valuing Environmental Quality Changes Using Averting Expenditures: An Application to Groundwater Contamination," Land Economics, University of Wisconsin Press, vol. 68(2), pages 163-169.
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    Keywords

    Environmental Economics and Policy; Research Methods/ Statistical Methods;

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