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

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  • Stavins, Robert
  • Wagner, Alexander
  • Snyder, Lori

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.

Suggested Citation

  • Stavins, Robert & Wagner, Alexander & Snyder, Lori, 2003. "Private Options to Use Public Goods: Exploiting Revealed Preferences to Estimate Environmental Benefits," Discussion Papers dp-03-49, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-03-49
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-03-49.pdf
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    References listed on IDEAS

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    1. Douglas M. Larson, 1993. "Joint Recreation Choices and Implied Values of Time," Land Economics, University of Wisconsin Press, vol. 69(3), pages 270-286.
    2. Bockstael, Nancy E & McConnell, Kenneth E, 1983. "Welfare Measurement in the Household Production Framework," American Economic Review, American Economic Association, vol. 73(4), pages 806-814, September.
    3. Rod F. Ziemer & Wesley N. Musser & R. Carter Hill, 1980. "Recreation Demand Equations: Functional Form and Consumer Surplus," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(1), pages 136-141.
    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. 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.
    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.
    7. W. Michael Hanemann, 1994. "Valuing the Environment through Contingent Valuation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 19-43, Fall.
    8. Mary Jo Kealy & Bishop Richard C., 1986. "Theoretical and Empirical Specifications Issues in Travel Cost Demand Studies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 660-667.
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    Cited by:

    1. Stavins, Robert, 2004. "Environmental Economics," Working Paper Series rwp04-051, Harvard University, John F. Kennedy School of Government.

    More about this item

    JEL classification:

    • Q26 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Recreational Aspects of Natural Resources
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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