环境经济学 environmental economics article分析代写

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环境经济学 environmental economics article分析代写

1. WHAT DO WE MEAN BY VALUE?

Ø  Value = amount of stuff (i.e. money) people would give up to improve environmental quality and be equally well off.
 
Ø  For most goods with rival and excludability properties, market demand curves can be observed
 
Ø  For many environmental goods (and bads) with non-rival and non-excludable properties, markets fail or do not exist
 

2. Demand and Preference
   1. The demand function—illustrated through a demand curve—tells us

Ø  how much an individual will spend on a given good out of an array of options
Ø  the marginal valuation a consumer places on a good at different consumption levels
Ø  how much of the good an individual is willing to forgo if the price increases
 

1. individual preferences

Individual preferences, manifested into the demand functions, can be aggregated to summarize the overall demand for a given good.
 
Ø  For an “ordinary” private good, market allows us to observe a variety of prices, and different purchases at different price levels.
 
Ø  For an environmental good (such as “clean air”), we do not have information on different consumption levels at different prices, even though individuals who value clean air more would be willing to pay a higher price for “additional unit” of air quality.
 

3. WTP and WTA

The valuation of (environmental) goods and services is the individual-specific concept that depicts the maximum amount (measured in dollars for convenience) someone would be willing to pay to obtain something.

1. Willingness to Pay (WTP): the amount which, if paid inexchange for a good or service, leaves the person just as well off as without paying and without receiving the good or service
15382. —the dollar amount someone would be willing to give up to obtain something

The concept of WTP for environmental quality is closely linked with the concept of damages due to the reduction ofenvironmental quality.
 

1. willingness to accept (WTA)—the dollar amount someone would be willing to accept in compensation for giving up something.

WTP → how much will an individual pay to live in a neighbourhood with less air pollution
WTA → how much compensation will an individual acceptto live in a neighbourhood with more air pollution
 

4. MEASURING DEMAND (2 type of method)

4.1   Revealed preference: infer the value of environmental goods from other market transactions
Ø  Hedonic analysis: look to prices paid for homes, land, jobs
Ø  Defensive expenditures: willingness to pay to avoid
Ø  Travel cost: willingness to pay to experience
 
In revealed preference, the actual choice is observed, which allows us to infer information on the trade-off between dollar amount and the environmental good.
Example:
Neighbourhood A and B are identical, except that
Neighbourhood A has clean air and high housing prices and
Neighbourhood B has more polluted air and lower housing prices.
 
Pro: We may infer that the difference in housing prices reflects the value people place on clean air.
Con: The issue with this approach is that observed choices capture only some of the total value that individuals attribute to the environment.
 
 
 
 
 
4.2   Stated preference: ask individuals, hypothetical situations
Ø  Contingent valuation
 
In stated preference, the actual choice is not observed, rather individuals are asked to report (state) how they would trade-off money for the environmental good if they had such opportunity.
Example:
Survey residents: How much would you pay for an opportunity to live in a cleaner environment?
Pro: The stated preference allows us to directly examine individuals’ valuation for goods and services for which markets do not exit.
Con: The issue with this approach is with the hypothetical nature of information. When asked, individuals may understate or overstate their valuation for some strategic reasons or simply due to the carelessness.
 
 
 

5. Method 1: HEDONIC ANALYSIS(Revealed preference)

Definition:
The hedonic pricing method is used to estimate economic values for ecosystem orenvironmental services that directly affect market prices
The hedonic pricing method is relatively straightforward and uncontroversial to apply, because it is based on actual market price. If data are readily available, it can be relatively Inexpensive to apply. But if data must be gathered and compiled, the cost of an application
 
Premise:
price of a marketed good is function of its characteristics
Value individual characteristics by looking at how the price people are willing to pay for the good changes when characteristics change
Data: market supply-demand equilibria
 
Example:
variation in housing prices reflecting value of local environmental attributes, like air quality or proximity to toxic facility
variation in land prices reflecting expected profitability of agricultural production (climate)
ta 5.6 Advantages of the Hedonic Pricing Metho
 
Advantages:
Ø  The method’s main strength is that it can be used estimate values based on actual choice
Ø  Property markets are relatively efficient in responding to in formation, so can b good indications of value
Ø  Data (property records)is typically very reliable and readily available.
Ø  The method is versatile, and can be adapted to consider several possible interactions between market goods and environmental quality
 
Issues and Limitations:
Ø  The scope of environmental benefits that can be measured is limited to things that are related to housing price.
Ø  The method will only capture people's willingness to pay for perceived differences in environmental attributes, and their direct consequences. Thus, if people aren’t aware of the linkages between the environmental attribute and benefits to them or their property, the value will not be reflected in home prices.
Ø  Themethodassumesthat people can select thecombinationoffeatures they prefer, given their income. However, the housing market may be affected by outside influences, like taxes, interest rates, or other factors.
Ø  The relationship between price and characteristics of the property may not be linear prices may increase at an increasing or decreasing rate when characteristics change T The method is relatively complex to implement and interpret, requiring a high degree of statistical expertise
Ø  Large amounts of data must be gathered and manipulated
Ø  The time and expense to carry out an application depends on the availability and accessibility of data
 

6. Method 2: Defensive Expenditures (Revealed Preference)

Defensive expenditures involve money spent to avoid an environmental bad (damage)
E.g. bottled drinking water, noise cancelling headphones, and air filters.
Spend if MB of reduction > MC
Lower bound on MWTP for environmental goods, lower bound on benefits individuals would receive if the harm was removed.
 

7. Method 3: Travel Cost (Revealed Preference)

Definition:
The travel cost method is used to estimate the value of recreational benefits (use values, generated by ecosystems
It assumes that the value of the site or its recreational services is reflected in how much people are willing to pay to get there
 
Intuition: visiting a site takes time and money
Ø  Travel cost approach: use price-quantity variation (demand curve) in travel cost to trace out WTP
Price: distance to park, opportunity cost of time, expenditures getting to/at site 1quantity: number of visitors
Ø  Travel cost =lower bound on benefits individuals receive from a site
Ø  Involved both direct costs (airfare, petrol, entrance fees, equipment) andindirect costs (opportunity cost of travel time)
Ø  Estimate travel cost
 
First, plot demand pairs, estimate parameters of demand curve
Second, consumer surplus Is area under curve and above amount paid (WTP)
Third, Infer the value of change in quality by looking at demand at different times (different weather, environmental conditions, etc.)
 
Advantages of the travel cost method
Ø  The method is based on actual behaviour(what people actually do)rather than stated willingness to pay (what people say they would de lo In a hypothetical situation)
Ø  The method is relatively inexpensive to apply
Ø  On-site surveys provide opportunities for large sample sizes, as visitors tend to be Interested in participating
Ø  The results are relatively easy to interpret and explain
 
Issues and limitations of the travel cost method
Ø  This approach cannot be used to measure non-use values. Thus, sites that have unique qualities that are valued by non-users will be undervalued
Ø  The travel cost method assumes that people perceive and respond to changes in travel costs the same way (can have sampling bias)
Ø  The simplest models assume that individuals take a trip for a single purpose-to visit a specific recreational site. Thus, if a trip has more than one purpose, the value of the site may be overestimated
Ø  Does not account for the availability of substitute sites
Ø  Does not always account for the fact that those who value certain sites may choose to live nearby (no distance =no travel cost)
Ø  Choice of the functional form used to estimate the demand curve. choice of the estimating method, and choice of variables included in the model can affect result
 

8. Method 4: Contingent Valuation(Stated Preference)

Definition
Ask people their WTP for a specific environmental improvement
It is a constructed. hypothetical market
It is the only known way to estimate non-use values
 
Step:
Step 1: Define market scenario
Ø  Identify the good to be valued in the study.
Ø  Ensure the market is “realistic enough”, so that respondents “buy in” to the scenario.
Ø  Avoid excessive complexity or abstraction.
Ø  Provide the appropriate context for the survey.
Ø  Put checks in the survey that respondents understand the setting.
Ø  Remind people substitutes exist.
 
Step 2:Choose elicitation method.
Four primary ways of eliciting value:
1. Open-ended: ask respondents for maximum WTP (unfamiliar context)
2. Bidding games: ask respondents whether they have WTP c. If respond “yes”’, ask c + ∆c, if “no”, propose c − ∆c (starting point bias)
3. Payment card: card with a number of figures, spanning range of responses that might be expected. Can have different cards for different incomes. (menu bias and cannot be used in telephone surveys)
4. Referendum (close-ended): ask respondents whether they have WTP c (or would they vote yes in a referendum that would increase fees by c), with c varied across respondents. (large sample)
 
Method                              Caveat
Open-ended → unfamiliar context
Bidding games → starting point bias
Payment card → menu bias and cannot be used in telephone surveys
Referendum → requires a relatively(close-ended) large sample
 
Step 3:Design market administration
Four basic approaches to administer a survey:
Method                                       Caveat
By Mail → low response rate; nonresponse bias
By Phone → no visual aid; selection bias
Online → selection bias
In-person → relatively expensive; interviewer bias

 
Step 4:Sample design
Decide on the target group
Ensure random sampling → To extrapolate to population,respondents must be representative
Step 5: Experimental design
Because surveys are not cheap, a researcher needs to take care in designing the survey, so that the obtained information is usable in subsequent analysis
Example: Are there enough respondents to obtain statistical power?
 
 
Step 6:Estimate WTP
The actual statistical methods applied to the collected information to estimate WTP measures.
This step, although carried out only after the data are collected, is typically thought through in conjunction with the previous steps.
 
INTERPRETING WTP RESULTS
WTP typically asymmetric distribution with long tail
median WTP < mean WTP
Mean WTP: total benefits = mean WTP × population
Median WTP: maximum per household cost that passes 50% majority vote
 
 
Problems with CV:
Ø  Hypothetical scenario(fake market)-usually means people overstate their WTP
Ø  Difference in WTP/WTA estimates(WTA>WTP)
Ø  Non- random sampling
Ø  Expensive and time consuming
Ø  Warm glow from saying support good causes
Ø  Ambiguity in what people are valuing (a class of goods rather than individual good）
Ø  Does not always take into account of substitutes
Ø  Anchoring: stated WTP pulled up/down to first number proposed
 
Additional Good Practice
Have a huge budget
Pre-test surveys
No open-ended questions
Believable specific payment mechanism (increase fees
Gather information about income, risk aversion, etc to check that sample is representative and Individual responses are consistent
 
Experimental Markets
Experimental markets are a second class of constructed(i.e, hypothetical) markets
A researcher constructs all the desired characteristics of a market, and then observes the behaviour of individuals within the market
Field experiments-market is constructed in population at large
Laboratory experiments--group of subjects are encouraged to participate, trading money for goods presented by the experimenter