Transcript What is Non-market valuation?

Non-market Valuation and its
Role in Forest and Watershed
Restoration
Julie M. Mueller, Ph.D.
Assistant Professor
Northern Arizona University
The W. A. Franke College of Business
Restoration Investment Strategies
for Arizona’s Forests and Watersheds
Thursday, October 3, 2013
What is Non-market valuation?
 Non-market valuation is an economic method of
estimating the value of goods and services not
commonly bought and sold in markets, such as:
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Ecosystem restoration
Endangered species habitat
Wildfire risk
Water quality
 Two categories of non-market valuation
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Stated Preference
Revealed Preference
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Stated Preference Methods
 Stated Preference methods obtain values for non-
market goods and services through survey
methods
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Choice Analysis: respondents are provided with a
well-defined set of choices with different levels of
an environmental good or service and asked to
choose their preferred combination
Contingent Valuation: respondents are presented
with a referendum-type situation and asked their
Willingness to Pay to obtain an environmental
good or service
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Revealed Preference Methods
 Revealed preference methods obtain values for
non-market goods and services through
observations of market behavior
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Travel Cost Method: the value of an environmental
good is a function of how much consumers spend
to visit the site
Hedonic Property Method: the value of an
environmental or service is reveled through relative
differences in house prices for homes with or
without the amenity
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Contingent Valuation and Forest
and Watershed Restoration
 Two studies exist in Arizona estimating
Willingness to Pay for restoration
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Irrigators in the Verde Valley are willing to pay
approximately $185 annually to fund monitoring
and maintenance of 4FRI (Mueller et al., 2013)
Residents of Flagstaff are willing to pay
approximately $5 per month on their water bills to
fund restoration of the Rio de Flag and Lake Mary
watersheds (Mueller, 2013)
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Areas of Future Research
 One are of important future research involves
using choice analysis to estimate non-market
values for a larger sample of Arizona residents,
including the greater Phoenix metropolitan area
 Another area of further research involves
estimating the impact of the Schultz fire on house
prices in Flagstaff, AZ
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Works Cited
 Mueller, J. M., Swaffar, W., Nielsen, E. A., and
Springer A.E. 2013. Estimating the Value of
Watershed Services Following Forest Restoration.
Water Resources Research 49: 1773-1781.
 Mueller, J. M. 2013. Estimating Willingness to
Pay for Watershed Restoration in Flagstaff,
Arizona Using Dichotomous-Choice Contingent
Valuation. Forthcoming in Forestry: An
International Journal of Forestry Research.
10.1093/forestry/cpt035.
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