Measuring dispositions for lexicographic preferences of environmental goods: integrating economics,psychology and ethics

This paper combines the psychometric methods of paired comparisons (PC) and environmental disposition measurement to assist in identifying lexicographic behavior in choice experiments. Our methodology obtains complete preference profiles of all elements in the choice set and measures of attitudinal dispositions, including an environmental ethics (EE) disposition, for all respondents. The methodology is applied across two treatments that differ only on the range of the dollar magnitudes—Treatment A ranges from $10 to $700 (USD) and Treatment B ranges from $10 to $9000 (USD). Dispositions of pastoralism (PA), antiquarianism and environmental ethicism tend to correlate positively with increasing preferences for environmental goods, while the disposition of environmental adaptation (EA) negatively correlates with preferences for environmental goods. The marginal effects of environmental dispositions are largest for respondents who do not value environmental goods highly (low valuers) and those who potentially value the goods lexicographically. The results demonstrate that information regarding our sample's attitudinal dispositions toward the environment may enable the differentiation of high valuers from lexicographic valuers of environmental goods.     

Measuring environmental quality: an index of pollution

This paper develops an index of pollution based on the epidemiological dose-response function associated with each pollutant, and the welfare losses due to exposure to pollution. The probability of damage is translated into welfare losses, which provides the common metric required for aggregation. Isopollution surfaces may then be used to compare environmental quality over time and space. An Air Pollution Index (API) is computed using 1997 data for the criteria pollutants under the Clean Air Act (CAA). The results are compared with the EPA's Pollutant Standards Index (PSI). Two significant differences emerge: unlike the PSI, the API facilitates a detailed ranking of regions by air quality and API values may contradict PSI results. Some regions with PSI values of 100–200 are considered less polluted under the proposed methodology than those with PSI values between 50 and 100. The key reason for the difference is that PSI values are determined entirely by the gas with the highest relative concentration whereas the API value is based on the ambient concentrations of all pollutants.     

A note on the marginal benefits and efficiency of goods provided by local government

This paper focuses on the specification error found in many of the empirical studies dealing with the economic efficiency of local government in providing goods such as education. The paper argues that the compensated demand function—rather than the ordinary demand function—should be used in order to derive the marginal benefits of a given good. The ordinary demand functions used in previous studies would lead to inflated estimates of the marginal benefits and, therefore, to inaccurate empirical results. The paper presents a compensated demand function derived from a linear expenditure demand system. Using public education as an example, it demonstrates how such a statistically unobservable compensated demand function can be used to produce correct measurements of marginal benefits of a public service provided by local government. The results of the investigation into the efficiency aspects of public education will also be discussed.     

Measuring the social value of local public goods: an empirical analysis within Paris metropolitan area

A non-linear hedonic model is used to estimate the implicit marginal prices of 17 local public goods in a Paris suburban area on an original data set of some 8200 housing units. The results reveal a robust effect of local public school quality (measured both by the fraction of junior high school students that are at least two years behind grade level and the student/teacher ratio) on house prices. It is observed that housing owners’ marginal willingness to pay for reducing commuting time is roughly similar for public transportation than for car transportation. Another noticeable result is the complete capitalization of local taxes at a discount rate of 3.5%. An illustration of the potential usefulness of the results for Cost–Benefit analysis is also provided.     

Measuring the benefits of environmental and public policy changes in cities: Short-term and long-term considerations

The paper investigates the relation between willingness-to-pay and change in property value measures of the benefits from an urban air quality improvement or other public policy change. We show that the two measures are not identical even in the open city case, nor does one measure consistently under- or over-estimate the other. The paper also develops a model of the effects of air quality improvements in the short run before the urban housing stock has fully adjusted to the change and investigates the values of the two benefit measures during this time period. We also consider the use of open and closed city models as alternative paradigms of the long-run effect of exogenous changes in cities.     

Economic inequality and burden-sharing in the provision of local environmental quality

A large, but inconclusive, literature addresses how economic heterogeneity affects the use of local resources and local environmental quality. One line of thought, which derives from Nash equilibrium provision of public goods, suggests that in contexts in which individual actions degrade local environmental quality, wealthier people in a community will tend to do more to protect environmental quality. In this paper we report on experiments performed in rural Colombia that were designed to explore the role that economic inequality plays in the ‘provision’ of local environmental quality. Subjects were asked to decide how much time to devote to collecting firewood from a local forest, which degrades local water quality, and how much to unrelated pursuits. Economic heterogeneity was introduced by varying the private returns to these alternative pursuits. Consistent with the Nash equilibrium prediction, we found that the players with more valuable alternative options put less pressure on local water quality. However, the subjects with less valuable alternative options showed significantly more restraint relative to their pure Nash strategies. Furthermore, they were willing to bear significantly greater opportunity costs to move their groups to outcomes that yielded higher average payoffs and better water quality than the Nash equilibrium outcome.     

Measuring benefits from spatially-explicit surface water quality improvements: The roles of distance,scope, scale,and size

Programs to improve water quality do not improve all water bodies equally. Evaluation of the benefits of such programs must account for where improvements occur and the relative magnitude of improvements that occur in different places. This study uses a choice experiment survey to explore how the value to a household of a surface water quality improvement varies as a function of (i) the distance between the household and the affected streams and rivers, (ii) the degree to which the quality of the water has been improved, (iii) how many stream and river miles have been improved, and (iv) the sizes of the affected streams and rivers. Results show evidence that value declines with distance in an approximately linear way, weak evidence that large rivers are worth more than small rivers, and no evidence that willingness-to-pay is nonlinear in either the degree of water quality improvement or the number of stream miles improved. These results indicate that it may be defensible in applied work to value small, spatially-explicit water quality improvement projects independently and then sum over projects.     

Clubs,local public goods and transportation models: A synthesis

Clubs, local public goods, and transportation models are analyzed within a unified model. The emphasis is on the derivation of optimal allocation, pricing and the size of the sharing group. We derive the conditions under which optimal prices will yield surplus or deficit, as well as those under which competitive provision will be efficient. Given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed. We show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs' local public goods and the transportation problems.     

Measuring recreation benefits of quality improvements with revealed and stated behavior data

We propose a combined revealed and stated behavior estimation method to measure recreation benefits of a fixed quality improvement that directly addresses the issues of variation in environmental quality beyond the observed range and new participation induced by higher quality. We survey a sample of the general population, including non-participants, to obtain stated preference data for trips based on a policy-relevant estuarine quality improvement. Panel recreation demand models that take into account new participants induced by the higher quality are estimated and used to derive total consumer surplus.     

Valuation of environmental goods: A shadow value perspective

This paper proposes a shadow value-based methodology for the economic valuation of environmental goods. The proposed method derives from a “cost of production perspective”. This type of approach represents advantages with respect to usual methods linked with “demand perspective”, when the interests of future generations is under consideration. The computational procedure is simple and the required information easy to obtain. We explain how the methodology works with the help of a forestry example.     

The benefits of voluntary leadership in experimental public goods games

We study the effects of voluntary leadership in experimental public goods games when each group member can volunteer to contribute before the other members. We find that voluntary leadership increases contributions significantly, compared to a treatment where leadership is enforced exogenously.     

Land rents,optimal taxation and local fiscal independence in an economy with local public goods

A general equilibrium model of an economy with cities, farms and free migration of population is constructed. The cities produce internationally traded goods via production functions subject to economies of scale. They also produce housing and a local public good. Two areas are defined to be disjoint if households performing an economic activity in one area are not operating in the other. An area is exclusive if it is disjoint to its complement. The economic surplus of an area is then defined to be the value of the area's net export of goods and resources. Local efficiency of an area is defined to be a state in which its economic surplus attains its maximum value. This state is proved to be a necessary condition for Pareto optimality of the economy. It is then proved that beside Piguvian corrective taxes the only taxes necessary and sufficient to finance local government activities efficiently, are taxes on land rents. Furthermore, if jurisdiction of a local government is over an exclusive area no intervention of central government is necessary, and local authorities can be fully autonomous. If the economy can be divided into pairwise disjointed exclusive areas, those areas are optimal jurisdictions in the sense that efficiency in the economy can be achieved with local authorities only.     

Commodity money in the presence of goods of heterogeneous quality

Summary The aim of this paper is to demonstrate that uncertainty about the quality of a particular commodity does not necessarily exclude it from emerging as commodity money. This is shown in the context of the model of a simple economy with specialized agents and decentralized trade described in Kiyotaki and Wright (1989). In order to derive this result, considerations about marketability of the different goods are taken into account.I wish to thank Pierre de Trenqualye for many helpful conversations and ideas. For their comments and suggestions I am also very grateful to G. de Fraja and P. J. Simmons. Special thanks are due to Randall Wright for his kind advice. The usual disclaimer applies. Financial support was provided by CIRIT (Generalitat de Catalunya, Spain).     

Measuring the contribution of durable goods to the welfare cost of inflation

In this paper, we measure the contribution of durable goods to the welfare cost of inflation, in the context of an endogenous growth model with durable and nondurable goods, where purchases of the latter require only a partial cash payment compared with the former. Unlike existing measures, our proposed welfare measure is computationally efficient and relatively easy to implement.We find that durability adds a significant component to the welfare costs of inflation.     

Unique and multiple equilibria in a macroeconomic model with environmental quality: An analysis of local stability

This paper develops and analyzes an economic growth model which incorporates environmental quality into the production and utility functions. We solve our model for the balanced growth path and find that a unique low growth equilibrium is attained when environmental quality is given less weight in the utility function. Multiple equilibria exist if environment quality is given greater weight in the utility function. We also perform local stability analysis of our model. We conclude that an economy in which the environmental quality is given relatively less importance by the agents will be caught in low growth, high consumption poverty traps as is the case for many developing countries while other economies can potentially reach a relatively low consumption, high growth steady state if they place greater weight on environmental quality. Finally we look at how the gap between low and high growth equilibria shrinks when individuals place greater weight on environmental quality and how governmental policies can promote growth when societies give less weight to the environment.     

Fairness in the contingent valuation of environmental public goods: attitude toward paying for environmental improvements at two levels of scope

Respondents to contingent valuation (CV) surveys give a variety of reasons for not wanting to pay money. This variability is likely to reflect people's attitudes toward paying for the public good change, their attitudes toward paying for public goods in general, and a component that is independent of these attitudes but unique to particular beliefs about paying (e.g. ‘I can't afford to pay’). Negative attitudes toward paying can contribute to an apparent insensitivity to different levels of the same public good. In a telephone survey, northern Wisconsin property owners were asked about their WTP for four environmental public goods (biodiversity, Indian spearfishing, water quality, and wolves) at two levels of scope (part and whole). For water quality and spearfishing, the part was a chain of lakes that was geographically nested within a larger region of lakes. Similarly, the biodiversity whole represented a region comprising the smaller level of the public good. The scope conditions for wolves were quantitatively nested levels of returning 300 and 800 wolves to northern Wisconsin. Respondents’ beliefs about paying for each public good and level of scope were measured in order to test their generality across the different public goods and levels of scope. Negative attitudes toward paying that are general across public goods place restrictions on the use of CV for environmental public goods. However, negative attitudes that are tied to specific environmental public goods suggest that the valuation method might be difficult to implement in these cases only. Moreover, negative attitudes toward paying that are either general or specific may contribute to perfect embedding when they are expressed across different levels of scope for the same public good. Respondents' beliefs about paying for each public good were associated with an attitude toward paying for the respective good and an attitude toward paying for public goods in general at both levels of scope. The general attitude was more explanatory of beliefs about paying for wolf reintroduction and spearfishing than were the specific attitudes. The distribution of beliefs was sensitive to the type of good being valued, but less so to the scope of the public good change. Contingent valuation practitioners should seek improvements in respondents' perceptions of the fairness of the valuation process in order to facilitate citizens' involvement in decisions about environmental public goods. Avenues for future research are proposed and discussed.     

Trade in quality goods,trading regimes and unemployment in transition economies1

One of the most important consequences of the transition in Central and Eastern Europe (CEE) has been the dismantling of the Council for Mutual Economic Assistance (CMEA). It is argued in this paper that the abrupt loss of trading partners for the former CMEA countries and the Newly Independent States (NIS) are partly responsible for the ensuing contraction of output and the emergence of unemployment. A model in which trade is conducted in vertically-differentiated products is constructed with the implication that the dismantling of ‘clearing trade’arrangements among CMEA countries may make unemployment more than just a short-term phenomenon.     

Consumer mobility and community tax bases : The financing of local public goods

In a model of economic ‘clubs’, size is fixed and members consuming a public good raise the question of composition; with whom would they rather consume? This depends on the way collective consumption is financed, and three results are proven With a poll tax, clubs must be homogeneous in income for all to be satisfied With a marginal benefit (Lindahl) tax, no consumer is ever satisfied with any composition; and with an income tax, at least one consumer in each club is always dissatisfied. Satisfaction implies there exists no club composition preferred to the existing one.     

Distribution of tastes and skills and the provision of local public goods

This paper introduces into the Tiebout model individuals with different skills. It is shown that the production techniques, the distribution of tastes and skills and intercommunity trade will affect the pattern of communities. In the suggested model competition with local public goods is Pareto optimal: communities will not be composed of identical people. The optimal solution requires that every community will tax everybody according to his marginal social cost. A Pareto efficient redistribution policy can be carried out only by a central government using lump-sum taxes. A federal income tax will affect community patterns and therefore is inefficient.