The future of farming: The value of ecosystem services in conventional and organic arable land. An experimental approach

In the current work, a novel, experimental ‘bottom-up’ approach is used to quantify the economic value of ecosystem services (ES) associated with highly modified arable landscapes in Canterbury, New Zealand. First, the role of land management practices in the maintenance and enhancement of ES in agricultural land was investigated by quantifying the economic value of ES at the field level under organic and conventional arable systems. This quantification was based on an experimental approach in contrast with earlier value transfer methods. Total economic value of ES in organic fields ranged from US $1610 to US $19,420 ha^− 1 yr^− 1 and that of conventional fields from US $1270 to US $14,570 ha^− 1 yr^− 1. The non-market value of ES in organic fields ranged from US $460 to US $5240 ha^− 1 yr^− 1. The range of non-market values of ES in conventional fields was US $50 — 1240 ha^− 1 yr^− 1. There were significant differences between organic and conventional fields for the economic values of some ES. Next, this economic information was used to extrapolate and to calculate the total and non-market value of ES in Canterbury arable land. The total annual economic and non-market values of ES for the conventional arable area in Canterbury (125,000 ha) were US $332 million and US $71 million, respectively. If half the arable area under conventional farming shifted to organic practices, the total economic value of ES would be US $192 million and US $166 million annually for organic and conventional arable area, respectively. In this case, the non-market value of ES for the organic area was US $65 million and that of conventional area was US $35 million annually. This study demonstrated that arable farming provides a range of ES which can be measured using field experiments based on ecological principles by incorporating a ‘bottom-up’ approach. The work also showed that conventional New Zealand arable farming practices can severely reduce the financial contribution of some of these services in agriculture whereas organic agricultural practices enhance their economic value.     

A Spatial Hedonic Approach to Assess the Impact of Swine Production on Residential Property Values

A spatial hedonic model is developed to assess monetary harm of confined animal feeding operations (CAFOs) on property values, taking explicitly into account spatial dependence in property values. Spatial autocorrelation was found in the form of spatial lag dependence, not spatial error dependence. When spatial lag dependence is explicitly taken into account, on average the impact coefficient estimate of a CAFO is reduced by 18%. For example, the impact on the value of the median house ($63,520) 1 mile from a swine facility with 10,000 head fell from  − $6,800 to  − $5,200, or 23.5%. The magnitude of the spatial autoregressive parameter was about 0.2 for the 1-mile distance band, meaning one-fifth of the house value could be explained by the values of the neighboring houses.     

An assessment of two environmental and economic benefits of ‘Cash for Clunkers’

This research aims to provide a more comprehensive, life cycle accounting of two categories of environmental and economic benefits associated with the $3 billion US “Cash for Clunkers” vehicle scrappage program. First, using a life cycle emissions methodology developed in Lenski et al. (2010), we find that about 29,000 metric tons of criteria pollutant emissions were avoided, for a benefit of about $23 million; avoided carbon dioxide emissions, by comparison, provided a benefit worth $90 million. Second, we compare the market value of scrapped vehicles to the rebates provided, calculating the consumer surplus or “gift” to participants to be up to $2 billion (about $2000 to $3000 per vehicle). This is significantly more than offered in previous vehicle scrappage programs, and suggests opportunities to get more environmental and economic “bang for the buck.” Finally, these two categories of benefits are found to be heavily concentrated geographically around urban centers. About 2% of US counties (50 counties) received 50% and 30% of the aggregate benefits from avoided criteria pollutant emissions and consumer surplus from the rebates, respectively.     

Bequest Values for Marine Resources: How Important for Indigenous Communities in Less-Developed Economies?

Communities owning and living on ancestral land tend to have a strong sense of stewardship over the land and its resources, which may translate into an economic value to present generations of being able to pass on ancestral lands to future generations (i.e. bequest value). This study estimates bequest values to local users of a traditional fishing ground on the Coral Coast of Fiji, using a contingent valuation approach. Using monetary as well as time-based contributions, bequest values are estimated at between FJ$1.25–1.41 (US$1.25–1.41 (US0.64–0.73) per individual per week, or FJ183.90 (US183.90 (US106.91) per household per year. This represents a significant proportion of stated average household expenditure, comparable to spending on durable household goods, and clothes and footwear. These results suggest that low-income groups may have significant bequest values, which should be accounted for in developing-economy valuation studies.     

Beyond mobile number portability: measuring consumer preferences for service portability in Japan's mobile phone market

Japan's mobile phone market has been oligopolized by three incumbents who are seeking vertically integrated business models, which may prevent competitors from using platform layers to provide original services. We conduct two types of conjoint analysis to measure consumer stated preferences and draw two main conclusions from the analyses. First, the average consumer is willing to pay more than JPY 2000 (US $20) to increase mobile service portability. Second, the average consumer's willingness to pay corresponds to JPY 100–200 (US $1–2) per song for securing music download platforms. A dilemma exists in consumer preferences for service portability in Japan's mobile phone market, namely the choice between free mobile service portability and convenient music download platforms.     

Exploring Benefit Transfer: Disamenities of Waste Transfer Stations

The benefit transfer method was developed as an alternative way to value externalities using values from studies of similar circumstances, carried out at similar sites somewhere else, given the challenges and high costs inherent in assessing the actual cost. Specifically, in order to test the performance of the benefit transfer method, employing hedonic price models, this study focused on estimates of disamenities associated with waste transfer stations at four different cities in Israel. The sites were intentionally selected to represent a variety of circumstances. We transferred the estimated benefit function from a “study site” to a “policy site”. The goodness of fit was examined by comparing the calculated value, with actual data from the policy site. To test the sensitivity of the benefit transfer function to socioeconomic and housing characteristics, it was repeatedly applied to different sets of observations. The findings suggest that a relatively large number of alternative benefit functions are transferable. Statistical inequality outcome regarding the degree of similarity between samples does not unequivocally rule out the appropriateness of transferring environmental values across studies. Transfer errors varied between −21% and +29%, and the absolute average error for all transfers was 15.4%. Errors were lower for transfer between relatively similar cities in terms of size and location and between sub-samples that were similar in socioeconomic characteristics and housing type. However, when a site with very dissimilar data was involved, the average absolute error rose to 19%.     

Economic impact of ocean fish populations in the global fishery

Our goal in this paper is to estimate the total output in an economy that is currently dependent (at least partially) on current fisheries output. We therefore applied the Leontief technological coefficients at current production and then estimate total output supported throughout the economy at the current level of production. Estimates of gross revenue from capture fisheries suggest that the direct value of output for this sector is US $80–85 billion annually (Sumaila et al., Journal of Bioeconomics 9(1):39–51, 2007; Willmann et al., The Sunken Billions, World Bank, FAO, Washington DC, Rome, 2009). However, as a primary or a potential economic base industry, there are a vast number of secondary economic activities—from boat building to international transport—that are supported by world fisheries, yet these related activities are rarely considered when evaluating the economic impact of fisheries. This study applies an input–output methodology to estimate the total direct, indirect, and induced impact of marine capture fisheries on the world economy. While results suggest that there is a great deal of variation in fishing output multipliers between regions and countries, when we apply the output multipliers to the capture fisheries sector at the global level, we find that significant indirect and induced effects place the impact of this sector to world output nearly three times larger than the value of landings at first sale, at between US $80–85 billion annually (Sumaila et al., Journal of Bioeconomics 9(1):39–51, 2007; Willmann et al., The Sunken Billions, World Bank, FAO, Washington DC, Rome, 2009). However, as a primary or a potential economic base industry, there are a vast number of secondary economic activities—from boat building to international transport—that are supported by world fisheries, yet these related activities are rarely considered when evaluating the economic impact of fisheries. This study applies an input–output methodology to estimate the total direct, indirect, and induced impact of marine capture fisheries on the world economy. While results suggest that there is a great deal of variation in fishing output multipliers between regions and countries, when we apply the output multipliers to the capture fisheries sector at the global level, we find that significant indirect and induced effects place the impact of this sector to world output nearly three times larger than the value of landings at first sale, at between US 225 and 240 billion per year.     

Heterogeneity in Values of Morbidity Risks from Drinking Water

This paper reports the stated preference values for reducing the morbidity risks from drinking water estimated using a nationally representative U.S. sample of 3,585 households. Based on the average annual gastrointestinal (GI) illness risk in the U.S. from drinking water of about 5 illnesses per 100 population, eliminating the GI risk has a median annual value per household of $219. The considerable heterogeneity in the values arises largely from differences in attitudes towards risk and price sensitivity. Using interval regressions, we find that valuations are greater for those who perceive a high personal risk, consume a large quantity of tap water, or are environmentalists. The paper explores several methodological issues pertaining to the iterative choice format involving a choice between two policies characterized by their cost and GI risk. The analysis adjusts for starting point effects by basing valuations on the tradeoffs that are estimated to prevail at the ??equitable tradeoff rate,?? which is the starting cost-water quality tradeoff rate that produces a 50?C50 split in the initial policy choice between policies with greater tradeoff rates and policies with lower tradeoff rates. The heterogeneity in valuations is also explored by examining quantile regression results and the determinants of the unbounded valuation amounts at the low and high extremes.     

Economic Value of Water Quality Improvement by One Grade Level in Erhai Lake: A Willingness-to-Pay Survey and a Benefit-Transfer Study

Water quality in China has seriously deteriorated in recent years. However, very few valuation studies have been conducted to estimate the monetary values associated with water quality changes. As a result, the decision makers can hardly make rational choices with regard to investments in water quality improvement. This paper presents a valuation study conducted in Dali, Yunnan Province, which aims to estimate the total economic value of improving the water quality of Erhai Lake by one grade level. Both the contingent valuation method and the benefit transfer approach are employed in this study. The contingent valuation estimation strategy reveals that, on average, a household located in Dali is willing to pay about 27 yuan per month continuously for 5 years for the water quality improvement, equivalent to 1.7% of the household monthly income. The elasticity of willingness-to-pay with respect to income is estimated to be 0.28. The internal rate of economic return of the proposed pollution control project is estimated to be 13%. The benefit transfer exercise produces a similar estimation on willingness to pay (WTP) values, with a difference of less than 2% compared with the contingent valuation approach. The results indicate the potential reliability of using the benefit transfer approach for valuation estimations in Chinese provinces.     

Valuing water quality improvement in China: A case study of Lake Puzhehei in Yunnan Province

Even though surface water has been polluted almost everywhere in China, few economic valuation studies have been conducted to value water quality changes. This paper reports an economic valuation study conducted in Yunnan, China, which estimates the total value of a real investment project to improve the water quality of Lake Puzhehei by one grade level. Located in Qiubei County far from big cities, the lake has been experiencing rapid water quality deterioration in past several years. Based on the multiple bounded discrete choice approach, an average household in Qiubei County is estimated to be willing to pay 30 yuan per month continuously for 5 years for the water quality improvement by one grade level, roughly equivalent to 3% of the average household income. The elasticity of willingness-to-pay with respect to income is estimated to be 0.21. The economic rate of return of the proposed project is estimated to be 18%, indicating an economically favorable investment in water quality improvement. This study also demonstrates that the previous knowledge about the water quality changes and about the project can have significant positive impacts on people's willingness to pay, whereas the interviewer effect on valuation can be negative.     

Economies of superscale in commercial banking

Most previous studies of scale economies in banking have excluded banks larger than $1 billion in assets. Thus study, by contrast, estimates cost functions for the 100 largest US commercial banks. ‘Hedonic’ terms are incorporated to correct for the aggregated nature of the Call Report data available for these banks. In addition, we attempt to quantify the cost benefit of diversification in the model. We estimate efficient bank scale to range from $15 billion to $37 billion in total assets, a thousandfold increase over some previous findings. These results are supported by comparison of actual average costs, as well as by casual historical observation and the level of widespread concern over interstate banking. Our findings suggest some cost incentive or benefit to expansion or consolidation among large regional banks, including interstate expansion or consolidation.     

SYSTEMATIC INFLUENCES ON TEACHING EVALUATIONS: THE CASE FOR CAUTION*

In this paper, we examine eight years of Quality of Teaching (QOT) responses from an Economics Department in an Australian University. This is done to determine what factors, besides the instructor, have an impact on the raw average student evaluation scores. Most of the previous research on student ratings has been conducted in the US. One significant difference between US and Australian tertiary education is that, on average, the number of foreign undergraduate students in Australia is ten times the number in US institutions. We find that cultural background significantly affects student evaluations. Other factors that have an influence on the average QOT score include: year level; enrolment size; the quantitative nature of the subject; the gender of the student; fee‐paying status by gender; course of study; the differences between the course mark and previous marks; the quality of workbooks; the quality of textbooks; and the QOT score relative to those in other subjects taught at the same time. In addition, average QOT scores for instructors who have taught in a mix of subjects are similar to those based on scores adjusted to account for subject and student characteristics.     

Winners, Losers, and the Nuclear-Waste Dilemma

This paper explores how property-right assignment affects social efficiency when a public program has both “public good” and “public bad” components. We show that when willingness to accept a public bad exceeds the willingness to pay, the net benefit is unambiguously lower when the property right supports the status quo institutional structure. Thus, Kaldor–Hicks efficiency tests tend to favor public programs and mitigation over the status quo even when mitigation negatively affects another group. To illustrate the result, we develop social-cost estimates for moving nuclear waste from current temporary-storage facilities to a permanent central repository at Yucca Mountain, NV, USA. For a representative city with a population of 226,195, the present value of the external cost of shipping waste is $1.42 billion when those living near temporary nuclear-waste storage facilities are assigned the property right to “health and safety.” That number swells to $5.95 billion when those living near the transport route are assigned the property right. Thus, property-right assignment affects the efficient level of nuclear-waste, and thus nuclear energy, produced.     

Induced-Value Tests of Contingent Valuation Elicitation Mechanisms

Using an induced-value experimental design that varies whether values for a “good” are certain or uncertain and whether payment is real or hypothetical, this study investigates issues of demand revelation, hypothetical bias, and value uncertainty for four elicitation mechanisms used in contingent valuation surveys: dichotomous choice, dichotomous choice with follow-up certainty question, payment card, and multiple-bounded discrete choice. For all elicitation mechanisms, we find no evidence of hypothetical bias: voting decisions do not vary systematically when payment is hypothetical versus when it is real. Under all design conditions we find the fewest deviations between stated and induced values and the strongest evidence of demand revelation with dichotomous choice. Stated uncertainty in dichotomous choice follow-up and multiple-bounded discrete choice questions does correlate with uncertain induced values, but the signal is noisy. We discuss the implications of our findings for the design of contingent valuation surveys.     

Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors

This article provides estimates of price–marginal cost ratios or mark-ups for 50 sectors in eight Euro area countries and the US over the period 1981–2004. The estimates are obtained applying the methodology developed by Roger (J Polit Econ 103:316–330, 1995) on the EU KLEMS March 2007 database. Five stylized facts are derived. First, perfect competition can be rejected for almost all sectors in all countries; markup ratios are generally larger than 1. Second, average markups are heterogeneous across countries. Third, markups are heterogeneous across sectors, with services having higher markups on average than manufacturing. Fourth, services sectors generally have higher markups in the euro area than the US, whereas the pattern for manufacturing is the reverse. Fifth, there is no evidence that there is a broad range change in markups from the 1980s to the 1990s.     

Rationality,constitutions, and the ethics of rules

It seems clear that individuals stand to mutually benefit, in a wide variety of situations, from structuring their interactions in terms of constitutional practices. But a commitment to treat the rules defining such practices as setting real constraints on choice—a commitment to what could be characterized as an “ethics of rules”—is hard to reconcile with the standard, consequentialist theory of rational choice, which requires, in effect, that individuals regard any rule as providing no more than a “maxim” for choice. Such a theory of rational choice, then, constrains individuals to settle for a second best outcome in which choice is aligned with practice rules by means of strategies of precommitment and threats. The outcome is second best because such methods yield only partial alignment, and involve the expenditure of scarce resources, as well as a sacrifice of flexibility and freedom. To say this, however, is to identify the corresponding theory of rational choice as havingconsequentially unacceptable implications. A modified theory of choice is presented, which is still consequentially oriented, but which assesses consequences in a more holistic manner. It is then argued that this modified theory can provide a rational choice grounding for the needed “ethics of rules.” The author would like to thank three anonymous referees for their very helpful comments and suggestions.     

Using revealed and stated preference data to estimate the scope and access benefits associated with cave diving

In a single-site travel cost model framework, revealed and stated preference data are jointly estimated to provide the first use-value estimate associated with recreational cave diving. Focusing on one of Florida's first magnitude springs, we estimate average per-person per-trip use values of approximately $155, generating annual cave diving use values in the region of $1075. Further, in an investigation of potential site quality changes, we find that divers are sensitive to scope effects with an additional cave system increasing annual per-person use values by approximately $100, while improved access yields an additional $50 in per-person annual consumer surplus. Finally, three additional model specifications are estimated and indicate that divers use different travel cost preferences when assessing their revealed and stated preference trip counts but a single preference structure to evaluate site quality changes.     

Economic Assessment of Forest Ecosystem Services Losses: Cost of Policy Inaction

This paper presents a bottom-up methodological framework for estimating some of the key ecosystem services provided by forests biomes worldwide. We consider the provision of wood and non-wood forest products, recreation and passive use services, and carbon sequestration. The valuation framework derives per hectare estimates by applying meta-analysis, value-transfer and scaling-up procedures in order to control for the existing heterogeneities across world regions and forest biomes. The first part of the study estimates stock values per hectare for each forest ecosystem service in the baseline year 2000 and in the year 2050. Results differ per geographical region and biome. Carbon stocks represent, on average, the highest value per hectare, followed by provisioning services, passive use and recreational values respectively. The second part provides an estimation of the welfare loss (or gain) associated with policy inaction in the period 2000–2050 leading to a change in the forest area. Welfare results are mixed and require a careful interpretation, ranging from a worldwide annual benefit of + 0.03% of 2050 GDP to an annual loss of −0.13%. The highest damage is expected in Brazil due to the increasing deforestation taking place in tropical natural forests, which is causing a considerable loss of carbon stocks.     

An Analytical Framework for Joint vs Separate Decisions by Couples in Choice Experiments: The Case of Coastal Water Quality in Tobago

This paper offers an analytical framework for analyzing joint and separate decisions by couples in the context of choice experiments for nonmarket valuation. It reports results from an attribute-based stated preference study in which members of couples are asked to conduct a choice-experiment first individually and then jointly. The choice context was the selection of which beach to visit while on vacation in Tobago. Available alternatives differed in attributes related to coastal water and beach quality such as level of coastal development and fish abundance. Tests of preference equality are reported and structured so as to identify the intra-couple decision-making patterns under taste heterogeneity with both finite and continuous mixed logit. Results from the latter suggest that women’s preferences are found to be predominant in the joint choice-experiment. Results suggest caution in using individual choice rather than joint couple choice when valuing quality changes impacting on couple activities, such as water and beach quality in Tobago, and call for further research on the topic.