Renewable and Nonrenewable Resource Theory Applied to Coastal Agriculture, Forest, Wetland, and Fishery Linkages

This paper addresses tradeoffs in wetland development using a framework that integrates economic theory of renewable and nonrenewable resources. The theory treats wetland development as use of a nonrenewable resource, while wetland preservation protects critical fishery habitat. The framework recognizes that wetland quality may vary for either development or fisheries. An illustrative application assesses tradeoffs in converting pocosin wetlands to agriculture rather than maintaining wetlands to protect salinity in estuarine nursery areas. Results reveal the marginal value of salinity protection may be substantial, while location may affect a wetland's value to an estuarine shrimp fishery. Comparisons between agricultural and forestry landuses show that ecological links may cause wetland values to depend upon the land-use chosen for the developed state. Future assessments of other development may reveal additional impacts through impacts on salinity.nonrenewable, renewable, fishery, wetland value, pocosin, Pamlico Sound, Community/Rural/Urban Development, Environmental Economics and Policy, Land Economics/Use, Resource /Energy Economics and Policy,

Tax Increment Financing for Optimal Open Space Preservation: an Economic Inquiry

The public has increasingly demonstrated a strong support for open space preservation. Questions left to local policy-makers are how local governments can finance preservation of open space in a politically desirable way, whether there exists an optimal level of open space that can maximize the net value of developable land in a community and that can also be financed politically desirably, and what is the effect of the spatial configuration of preserved open space when local residents perceive open space amenities differ spatially. Our economic model found the condition for the existence of an optimal level of open space is not very restrictive, the increased tax revenue generated by the capitalization of open space amenity into property value can fully cover the cost of preserving this optimal level of open space under a weak condition, and being evenly distributed and centrally located is very likely to characterize the optimal spatial configuration of preserved open space in terms of net social value and the capacity of tax increment financing.Environmental Economics and Policy,

Allocation of Land at the Rural-Urban Fringe Using a Spatially-Realistic Ecosystem Constraint

Development in rural-urban fringe communities is increasing with the potential to damage healthy ecosystems and endanger the long-term persistence of resident flora and fauna. The environmental impacts of development include loss, degradation, and fragmentation of wildlife habitat, increased air and water pollution, increased soil erosion, and decreased aesthetic appeal of the landscape. Current land use policies rarely incorporate features of landscape-scale ecosystem health. This paper develops a model that combines ecological and economic constructs to determine the optimal allocation of development across a spatially-realistic landscape. The land allocation model establishes links between long-term metapopulation persistence and development through an ecosystem constraint. A social planner seeks to maximize the benefits of development while guaranteeing a certain likelihood of long-term metapopulation persistence across the landscape that accounts for the changes to habitat patches and species dispersal success brought about by development. It is shown that in an economically homogeneous environment, the allocation of land to developed uses is determined solely by ecological elements (landscape structure and species parameters). The amount of land remaining in each habitat patch is the same regardless of their initial sizes or initial levels of development. The cost to society of meeting the ecological objective for metapopulation persistence depends on the land rent, the level of the safe-minimum-standard, the area of the landscape management unit, the distance between habitat patches, the dispersal ability of the focal species, and the species-specific area scaling parameter. Cost is not affected by the initial conditions of the habitat patches or the amount of development that has already taken place in the landscape management unit. When heterogeneity is introduced, the allocation of land is also determined by the differential land rents. More development occurs in habitat patches and landscape management units with higher land rents compared with the homogeneous case. In the heterogeneous land use case, where different land uses have different intensities of damages, the development intensity parameters are factors in the solution with more development occurring in areas zoned for less intensive land uses and the cost to society of achieving the ecological objective is a function of initial habitat patch sizes.Land Economics/Use,

ARE STATED PREFERENCES INVARIANT TO THE PROSPECT OF REAL-MONEY CHOICE?

This paper reports on a choice experiment where respondents stated their preferences for different wetland parcels. The study used hypothetical surveys to measure respondents' preferences, but in one survey version respondents expected and received a follow-up question involving real monetary payments. The results indicate that those respondents who received hypothetical surveys that included a real-money question registered a different preference function from those respondents who received a survey that asked respondents to answer hypothetical questions only. The study finds that respondents may reverse their preferences for parcel attributes, such as public access to the parcel as related to presentation.Financial Economics,

TOWARD ASSESSING THE NON-MARKET BENEFITS OF EXPERIMENT STATION RESEARCH: A CASE STUDY OF PUBLIC PREFERENCES FOR AES RESEARCH IN RHODE ISLAND

This study reports on a survey assessment of the public preferences for the Rhode Island Agricultural Experiment Station's research program. The study summarizes preferences to allocate effort to alternative research projects and estimates the public's willingness to pay to maintain or increase research effort.Teaching/Communication/Extension/Profession,

Generating Revenues from WTP for Ecosystem Restoration: An Auction Experiment on Public Goods

Research on public good auctions is intended to initiate development on new approaches to finance public goods, beyond government and philanthropic efforts. The researchers evaluate the potential to identify economic value for a subset of ecosystem services and markets that have the potential to provide for them. Empirical analysis focuses on public valuation for three specific types of ecosystem activities (bird habitat, sea grass restoration and shellfish restoration) in coastal Virginia. Data was collected using a field experiment employing an experimental auction approach with mechanisms to reduce free riding often seen in the experimental economics literature. These incentive mechanisms are applied to individual restoration activities and willingness to pay estimates are compared to a baseline choice experiment that employs an incentive compatible, majority vote mechanism and actual (not hypothetical) money payments. A conditional logit model, rooted in McFadden’s choice theory, is used to examine the trade-offs between ecosystem restoration activities to estimate willingness to pay, while interval regressions are applied to individualized price auctions. Linear and nonlinear models are estimated to check for validity and sensitivity to scope.experimental economics, valuation, public goods, ecosystem services, Environmental Economics and Policy,

Marketing Ecosystem Services from Agricultural Land: Stated Preferences over Payment Mechanisms and Actual Sales of Farm-Wildlife Contracts

Agriculture conventionally supplies food, fiber and fuel that consumers can purchase through the market. With the right incentives, farmers can also provide ecosystem services such as wildlife habitat, climate regulation, surface water flows and waste absorption and breakdown. Such incentives have so far come almost entirely from government-sponsored programs that rely on financial assistance to farmers to encourage them to alter agricultural practices or input mix to enhance ecosystem services. Programs recently implemented in Costa Rica and Columbia rely on payments by the beneficiaries of the ecosystem services, such as municipal water companies and water users (Pagiola et al. 2002). Few of these programs, however, have attempted to establish a market for ecosystem services in which the beneficiaries of such services pay the suppliers their personal values of ecosystem services in an actual market. Markets for ecosystem services must overcome two major challenges. In order to set prices for ecosystem services at the right level, it is imperative to understand consumers preferences. Farmland, however, has multiple attributes such as wildlife habitat services and landscape view; the marginal rate of substitution among those attributes must be understood to design marketable products for ecosystem services. Moreover, many ecosystem services are public goods for which traditional markets are ill-suited, because many individuals can receive benefits simultaneously regardless of whether they have paid part of the cost of provision. Therefore, consumers have an incentive to free-ride on others. Evidence from previous research on public goods clearly suggests that under-contribution is typical (e.g., Ledyard 1995). The overall goal of this study is to explore the potential to establish an actual market in which the public can purchase ecosystem services generated by agricultural land. More specifically, this paper evaluates the performance of alternative elicitation methods that are intended to reduce individuals incentives to free-ride on others payments for ecosystem services. Using a choice experiment involving a large-scale mail survey, we first estimate the marginal rate of substitution consumers place on various attributes of farmland including the ecosystem services such land can provide. We further compare the results across different payment mechanisms and examine which ones are capable of revealing demand that is closer to consumers true value. Second, we attempt to establish an actual market in which individuals are asked to purchase a share of a farm contract to provide ecosystem service with real money under different payment mechanisms. We compare the market outcomes with the choice experiments. To the best of our knowledge, this is the first study to examine the performance of different payment mechanisms for provision of ecosystem services using field experiments both within a hypothetical setting and by developing an actual market. The ecosystem service in question in this study is habitat for a grassland-nesting bird called the Bobolink (Dolichonyx oryivorus). Yellow and black Bobolinks establish ground nests in hay fields from mid-May into early June. Their visibility and entertaining character, combined with evidence that many birds, including bobolinks, are experiencing population declines (Sauer et al. 2004), make the bird a leading candidate to attract public interest in efforts to manage farmland for vulnerable wildlife. Previous studies have established that hay harvesting conducted during the birds five to six week nesting period is devastating to fledgling success (e.g., Mitchell et al. 2000). A fairly moderate shift in the harvest schedule could provide significant refuge for nesting birds while causing some losses of the quantity and quality of the hay harvested. If a market developed that paid farmers acceptable compensation to protect grassland birds, then farmers would have an incentive to add an ecosystem service to their revenue base while enhancing environmental quality for wildlife. In this study, we compare four payment mechanisms applied in field experiments: 1) voluntary contribution mechanism, 2) provision point with a money-back guarantee and proportional rebate of excess contributions (PPMBG-PR), 3) uniform-price, multi-buyer auction and 4) pivotal mechanism. Voluntary contribution mechanism has no provision point but has a money-back guarantee if enough money is not raised. Under PPMBG-PR, the public good is supplied only if a pre-specified amount of money (the provision point) is raised, and contributors receive their money back if the market fails to raise that amount. Under a multi-buyer auction, everyone who is willing to pay above a certain price will pay a price such that the total sum will be enough to cover the cost for a farmer to change harvest practices. Under a pivotal mechanism only those consumers whose payments make a difference in the provision of the good would pay. The pivotal mechanism is incentive compatible and is used as the baseline. We test the following hypotheses on the WTP, market participation rate and total revenue collection: (1) WTP: Voluntary contribution < Multi-buyer Auction < PPMBG-PR < Pivotal (2) Participation rate: Voluntary contribution < PPMBG-PR < Multi-buyer auction < Pivotal (3) Revenue collection: Pivotal < Voluntary < Multi-buyer auction < PPMBG-PR We perform a large-scale cross-mechanism comparison using two types of field experiments, a survey involving hypothetical questions and a functioning market for an ecosystem service. In the survey, the subjects are randomly assigned to one of the elicitation methods. We posit a hypothetical situation involving a market for contracts with farmers, describe the assigned elicitation method and ask respondents to compare several sets of two alternative farm wildlife contracts, each with five attributes presented in a stated-choice format. One of the attributes is to change the timing of hay harvesting to enhance the success of a specified number of bobolink fledglings on a given size of farm. The survey data were collected in fall of 2006. Survey questionnaires were sent to all of the 2,987 households in Jamestown, Rhode Island. The response rate was about 37% after accounting for undelivered surveys. Although still preliminary, a key result from the choice experiment is that consumers are least willing to pay for farm wildlife contracts under the voluntary contribution mechanism. The payment method that generated the greatest total purchases of farm wildlife contracts was the multi-buyer auction, followed by the pivotal mechanism and PPMBG-PR, respectively. This result suggests that some features of the payment mechanisms (such as setting of a provision point, fairness and a money-back guarantee) encourage consumers to reveal demand that is closer to each consumer true value of the good than the demand revealed by a simple voluntary contribution mechanism in a field experiment using a hypothetical situation. We are currently in the process of launching an ecosystem-service market in Jamestown by establishing actual farm wildlife contracts with farmers and selling shares of those contracts to consumers. The market will be open to the public for two months during March and April, 2007. Each farm wildlife contract will be tied to one or more of the payment mechanisms and whether each contract will remain effective during the breeding season will depend on the market outcome under each mechanism. Consumers will be randomly assigned to one of the elicitation methods. Using market data, we will compare the actual consumer behavior across alternative methods and also to their willingness to pay as estimated in the survey choice experiment.Land Economics/Use,

VALUING WATER QUALITY MONITORING: A CONTINGENT VALUATION EXPERIMENT INVOLVING HYPOTHETICAL AND REAL PAYMENTS

This paper studies the preferences and willingness-to-pay for individuals for volunteer water quality monitoring programs. The study involves supporting water quality monitoring at two ponds in the state of Rhode Island. The paper uses both a hypothetical and a real-payment contingent valuation survey to directly measure individual preferences and willingness-to-pay (WTP) for volunteer water quality monitoring at the two ponds. The overall results of the study suggest that hypothetical WTP is not statistically greater than real WTP, and that the average survey respondent is willing to support water quality monitoring on one of the two ponds. The study also finds that the specified purpose of water quality monitoring and certain socioeconomic characteristics of a respondent significantly affect the respondent's decision to support volunteer water quality monitoring.Environmental Economics and Policy,

STATED PREFERENCES AND LENGTH OF RESIDENCY IN RURAL COMMUNITIES: ARE DEVELOPMENT AND CONSERVATION VALUES HETEROGENEOUS?

Newer residents of rural, urban-fringe communities are often assumed to have preferences for the development and conservation of rural lands that differ from those of longer-term residents. The existing literature offers little to verify or quantify presumed preference shifts. This paper provides a systematic, quantitative examination of whether stated preferences for development and conservation tradeoffs differ according to length of residency in a rural community, and explores implications of these findings for assumptions regarding development and conservation preferences. Results are based on stated preferences estimated from a multi-attribute contingent choice survey of Rhode Island rural residents. Heterogeneity-according to length of town residency-is incorporated using Lagrangian Interpolation Polynomials. This approach models the influence of policy attributes as a polynomial function of residence time, thereby allowing estimated coefficient values to vary as a continuous function of residence duration.Community/Rural/Urban Development, Land Economics/Use,

THE INFLUENCE OF SPATIAL LAND USE PATTERNS ON RURAL AMENITY VALUES AND WILLINGNESS TO PAY FOR GROWTH MANAGEMENT: EVIDENCE FROM A CONTINGENT CHOICE SURVEY

This paper reports on a contingent choice study in which residents of a rural Rhode Island community were asked to express their preferences for packages of growth management outcomes, where surveys presented both spatial and non-spatial attributes of growth management outcomes. Survey results provide insight on the extent to which estimated willingness to pay (WTP) for marginal changes in specific landscape features or land uses may be influenced by spatial considerations. Results also characterize the potential impact of spatial context on public preferences and WTP for coordinated packages of growth management outcomes. Keywords: Land Use, Spatial, Contingent Choice, Growth Management, Economics, ValuationLand Use, Spatial, Contingent Choice, Growth Management, Economics, Valuation, Land Economics/Use,