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The Value of Water Quality: Estimating Amenity and Recreational Benefits

Date and Time

Wednesday 12/11/2019 10:30AM to 12:00PM EST
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Room 1426, William Jefferson Clinton West Building
1301 Constitution Ave., NW
Washington, DC 20001


Contact: Carl Pasurka, 202-566-2275

Presenter:  Yusuke Kuwayama (Resources for the Future)

Description:  Prior work suggests that, unlike air pollution regulation, the marginal cost of ambient water pollution regulation in the United States often exceeds its marginal benefit. This paper provides some intuition, theory and empirical evidence suggesting that the typical hedonic property model -- a common revealed-preference approach in the literature valuing environmental amenities -- may tend to understate MWTP for the improved recreational opportunities that better water quality affords to local homeowners. Using the case of nutrient pollution in Tampa Bay, Florida, we estimate MWTP for water quality improvements by combining a recreation demand model with a hedonic housing model, allowing households to optimize over regional aquatic recreation opportunities (influenced by pollution in recreational waters) as well as ambient water quality very close to homes. Results indicate that homeowners have significant MWTP for both improvements in local ambient water quality and improvements in regional recreational waters. Our recreational benefit estimates are much larger than those we estimate for local amenity values, suggesting that prior hedonic studies may underestimate the value of water pollution control.