What's it worth? An examination of historical trends and future directions in environmental valuation

The present paper reviews activity in environmental valuation by examining trends in publication rates over the past three decades. It also provides an overview of the demand for environmental valuation by academic markets and by policy markets. The results of this historical analysis suggest that there is not as much use of environmental valuation in policy analysis as could be expected given the academic efforts on this topic. The paper also provides an overview of the future directions that environmental valuation research is likely to take given current research efforts.Environmental Economics and Policy,

HABIT FORMATION AND VARIETY SEEKING IN A DISCRETE CHOICE MODEL OF RECREATION DEMAND

The recreational site choice decision modeled in most economic analyses seldom contains previous experience with the site as a characteristic or attribute. A rational dynamic model is used to incorporate previous experience with the site in a model of the choice of recreation sites. Based on the comparison of dynamic and static models, it is apparent that dynamic elements influence choice. The use of previous consumption as an attribute (either in a naïve or rational form) is an improvement over static models of choice. In welfare analysis, this effect may be a significant factor. For example, a change in prices or quality attributes may have a much larger impact on those individuals who have developed habits.Resource /Energy Economics and Policy,

Integrating Routine, Variety Seeking and Compensatory Choice in a Utility Maximizing Framework

Given the large number of choices that consumers make each day it seems likely that they will generally adopt decision strategies that minimize cognitive effort, particularly with low price products such as most items found in a supermarket. One such strategy may be to simply choose what has been chosen in the past, i.e. to fall into a pattern of routine choices or decisions. In contrast, there may be preferences for variety in markets for low price, highly differentiated goods. We develop a conceptual and empirical model of routine choice, and the factors that result in transitions to two strategies other than routine selection, to wit, utility maximizing choice among available alternatives and a variety seeking strategy. The empirical approach we employ provides a mechanism for the examination of panel data that avoids the state dependence issues present in most applications to these types of data. We apply this framework to the choice of two food products that illustrate the heterogeneity across types of products in decision strategies and routine choice patterns.Choice modeling, routine behavior, variety‐seeking, panel data, Consumer/Household Economics, Demand and Price Analysis, Institutional and Behavioral Economics, D12, D03, C25,

TESTING NONMARKET VALUES IN A NONPARAMETRIC FRAMEWORK

Resource /Energy Economics and Policy,

GENETICALLY MODIFIED FOODS: CONSUMERS' ATTITUDES AND LABELING ISSUES

Consumers' attitudes to genetically modified (GM) food ingredients and their reactions to and preferences for labeling of GM food are topical issues for Canadian food policy and are the subjects of this study. This project included several components. The first of these was an assessment of public attitudes to biotechnology and to GM food based on evidence from polls and other studies. These show increasing awareness and some increase in wariness of GM food, in Canada and elsewhere. In the second component of the project, analysis of survey data on Alberta consumers' preferences for different policy approaches to GM food was undertaken. This analysis indicates a preference by Alberta residents for GM food policy to emphasize the provision of more information to consumers, through labeling, over a policy that would provide for more rigorous inspection; even so, more inspection was favored by many respondents. More regulation that would restrict biotechnology was the least favoured of the three options that were presented to Alberta respondents. In a third component of the project, a case study on individual's attitudes to and preferences for GM ingredients in two selected food items (one of which was a nacho chip and the other of which was bread) was pursued through focus groups that were conducted in Edmonton, Alberta in 2002. This indicated highly varied attitudes and responses to GM food in general and to the selected products in particular. Attitudes to and preferences for environmental and health benefits that might be introduced through biotechnology were explored in these groups. Some 50 percent of focus group respondents indicated a willingness to buy the identified GM products, at a price discount. The fourth and final component of the project involved two sections of a Canada- wide survey, conducted in early 2003. These components queried respondents' assessments of the importance of various food safety risks and various environmental issues associated with food and agriculture, as well as attitudes to labelling policy. Overall, Canadians tended to see agricultural biotechnology as more of an environmental risk than a food risk and numbers of other food and environmental issues were seen to be more risky by many respondents. However the use of genetic modification/engineering in food production was seen as a very high risk issue by about one-fifth of respondents. Respondents also indicated a strong desire for public involvement in biotechnology policy, voted strongly for mandatory labeling and disagreed that labeling is not needed if the product's quality remains unchanged. An appreciable majority of respondents expressed a degree of skepticism concerning the use of voluntary labeling. The findings of this project have served as a basis for subsequent more extensive and detailed assessment of Canadian consumers' risk preferences and trade-offs in the context of specific product GM labelling policies.Demand and Price Analysis, Research and Development/Tech Change/Emerging Technologies,

TIME IN RECREATION MODELING AND DECISION MAKING

Consumer/Household Economics,

CONSUMER'S PERCEPTIONS OF ENVIRONMENTAL RISKS AND THE DEMAND FOR FOOD SAFETY

Public concern regarding food safety has emerged as a major policy issue. Chemicals and biotechnological processes are perceived as risks of food safety despite their contribution to an efficient, low cost agriculture and food industry. Increases in uses of biotechnological processes for foods are expected to be a major potential source of productivity improvements for Alberta and Canadian agriculture in future years. However, the demand for food safety involves increasing awareness and concern by consumers of chemical inputs and biotechnological processes in the agriculture and food industries. Nonetheless, there is a lack of basic economic and agricultural economic theory and methodology to analyze these issues and a need for policy, socioeconomics and marketing research on biotechnology and other environmental risk situations in the agricultural and food industry. This project was directed at developing and applying economic theory and methodology to help fill this gap. A major contribution of the project is the identification and verification of methodologies of stated choice to analyse tradeoffs arising from food safety perceptions of concerns by consumers. One component of the research project involved assessment of Alberta consumers' stated preferences and purchase behaviour for foods exhibiting a range of environmental risks, including perceptions of pesticide residues and hormonal treatments derived from biotechnological processes. The results of this survey indicated that Albertans were more concerned about pesticide use in food production than about the use of hormones. In contingent valuation questions developed for the study, more Albertans wish to restrict pesticide use (relative to a base case of not restricting either hormones or pesticides). They tended to persist in these choices in the face of potential increases in food costs, reflecting a higher level of concern with pesticides than hormones. Increasing education increased this concern. Increasing food cost decreased the probability of choosing to restrict pesticide or hormone use. Women appeared to perceive pesticide use in food production as a greater food safety risk than was perceived by men. The inferred average willingness to pay to restrict pesticide and growth hormone use in food production amounted to about 25% and 13% respectively of the average Albertan's food expenditures respectively. In the second survey of consumers' food/environmental risk perceptions undertaken relative to this project, the responses of a random sample of consumers to the use of recombinant bovine somatotrophin (rBST) in milk production were elicited using a stated preference methodology. A conditional logit model of consumer choice was developed and tested to analyse consumers' choices of milk with varying characteristics of fat content, price, freshness and rBST treatment. Awareness of rBST presence or otherwise is implied by labelling. The approach attempts to simulate market conditions with and without rBST labelled milk and to predict consumers' responses to variations in these conditions. Welfare calculations for a representative consumer indicate welfare losses with the introduction of rBST. These were slightly less for a male than a female household food purchaser and were less for food purchasers with higher levels of income and education. There was a small welfare gain when the representative food purchaser was offered a full range of "rBST" and "non-rBST" milks. The results suggest that making appropriately labelled "rBST-free" milk available to consumers could decrease consumer welfare losses associated with any introduction of rBST. The outcomes from application of these methodologies were related to the evidence of consumers' purchasing behaviour after licensing of the technology of rBST for use in the United States; this introduction did not require labelling. The assessment suggests a critical impact of product labelling policies and strategies on potential market impacts. An assessment is also made of Canada's food safety regulatory framework. The need for increased transparency and greater public participation in regulatory processes as means to increase public confidence in such food safety regulatory processes, specifically relating to biotechnology, is also identified.Food Consumption/Nutrition/Food Safety,

THE EFFECTS OF TRADE LIBERALIZATION ON THE ENVIRONMENT: AN EMPIRICAL STUDY

We seek to contribute to the emerging economic theory on trade, the environment and development. Using panel data across countries, econometric models are estimated to predict the effects of openness on organic water pollutant (BOD) and carbon dioxide (CO2) emissions. Results indicate that freer trade significantly increases emissions of both pollutants, thus reducing environmental quality. Moreover, the panel nature of the data allows heterogeneity across countries to be controlled, so that comparisons can be made of how different national characteristics influence the environmental impact of freer trade. By testing the effects of democratic versus autocratic governance, it is found that while greater democracy can induce significant reductions in BOD emissions as openness increases, it may also lead to increased CO2 levels. Meanwhile, by testing for and failing to reject the pollution haven hypothesis, it is suggested that environmental gains from openness in relatively rich countries may be coming at the expense of environmental degradation in poorer countries.Environmental Economics and Policy, International Relations/Trade,

The Role of Economic Instruments to Resolve Water Quantity Problems

Resource /Energy Economics and Policy,

‘Pocket and Pot’: Hypothetical Bias in a No-Free-Riding Public Contribution Game

Hypothetical bias arises when values which people say they place on a good or service differ systematically from the values people reveal for the same good or service through actual, binding economic transactions. Studies of hypothetical bias with respect to public goods often use charitable contributions or other relatively unique goods and these studies employ a variety of mechanisms to elicit the stated and revealed values. This study proposes the inclusion of a free-rider barring random dictatorship mechanism in the standard public contribution game to investigate the issue of bias when a public good involves immediate monetary returns to subjects. Steps are taken to make the game have the look and feel of a real-world tradeoff between private investment and public good provision. Data for the experiment were collected using a sample of students from the University of Alberta. A statistically significant negative hypothetical bias is found for the first hypothetical and the first real rounds of the game. The bias decays in subsequent round pairs, oscillating around zero.Resource /Energy Economics and Policy,