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

32 Pages Posted: 16 Apr 2003

See all articles by Lori Snyder Bennear

Lori Snyder Bennear

Duke University - Nicholas School of the Environment

Robert N. Stavins

Harvard University - Harvard Kennedy School (HKS); Resources for the Future; National Bureau of Economic Research (NBER)

Alexander F. Wagner

University of Zurich - Department of Banking and Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swiss Finance Institute

Date Written: June 2003

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.

Keywords: Revealed Preference, Environmental Benefits, Fishing Licenses, Recreational Fishing Day

JEL Classification: Q26, Q21, Q22, H41

Suggested Citation

Bennear, Lori Snyder and Stavins, Robert N. and Wagner, Alexander F., Private Options to Use Public Goods: Exploiting Revealed Preferences to Estimate Environmental Benefits (June 2003). Available at SSRN: https://ssrn.com/abstract=385801 or http://dx.doi.org/10.2139/ssrn.385801

Lori Snyder Bennear

Duke University - Nicholas School of the Environment ( email )

Box 90328
Durham, NC 27708-0328
United States

Robert N. Stavins (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-1820 (Phone)
617-496-3783 (Fax)

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alexander F. Wagner

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
Z├╝rich, 8032
Switzerland
+41 44 634 3963 (Phone)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Swiss Finance Institute ( email )

Switzerland

HOME PAGE: http://www.alex-wagner.com

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