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Environmental and Resource Valuation with Revealed Preferences: A Theoretical Guide to Empirical Models / Edition 1

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This book provides a systematic review of those economic approaches for valuing the environment and natural resources that use information on what people do, not what they say. The authors have worked on models of revealed preferences for valuing environmental and natural resources for several decades. The book provides a candid review of the major conceptual challenges and an exploration of neglected issues in the literature.

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Editorial Reviews

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"In this book, Bockstael and McConnell concisely synthesis the economic principles that must be followed for revealed preference methods to yield valid welfare measures. … This book provides that grounding in a clear and concise way. In addition, this book will be a major time saver to applied environmental economists attempting to do theoretically sound empirical work." (John Loomis, Environmental and Resource Economics, Vol. 42, 2009)

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Product Details

Table of Contents

PREFACE. 1. SETTING THE STAGE. 1.1. Oil Spills and Valuation. 1.2. Where Do We Begin? 1.3. The Purpose and Approach of the Book. 1.4. The Maintained Assumptions. 1.5. What the Book Omits. 1.6. A Look Ahead. 2. WELFARE ECONOMICS FOR PRICE CHANGES. 2.1. Introduction. 2.2. Compensation Measures. 2.2.1. Willingness to Pay and Willingness to Accept. 2.3. From Behavior to Welfare Measures. 2.3.1. So What is Wrong with Consumer Surplus? 2.4. From Ordinary Demands to Welfare. 2.4.1. Multiple Price Changes. 2.5. Income and Welfare Effects. 2.5.1. Endogenous Income. 2.6. Non-Linear Budget Constraints. 2.7. Conclusions. 3. THE CONCEPT OF COMPLEMENTARITY. 3.1. Introduction. 3.2. The Basic Problem. 3.3. The Public Good as an Attribute. 3.3.1. Weak Complementarity. 3.3.2. Can Weak Complementarity Be Tested? 3.4. Weak Complementarity and Marshallian Demands. 3.4.1. The Willig Condition. 3.5. Welfare without Weak Complementarity. 3.6. Conclusions. 4. IMPLEMENTING WEAK COMPLEMENTARITY. 4.1. Introduction. 4.2. Specifying Demand as a Function of Quality. 4.2.1. Translations of Utility Functions. 4.2.2. Utility Parameters as a Function of Quality. 4.3. Weak Complementarity and Household Production. 4.3.1. Household Production and Constant Marginal Costs. 4.3.2. Incorporating Time Costs. 4.3.3. Time in Incomplete and Partial Demand Systems. 4.3.4. On-Site Time and Non-linear Budget Constraints. 4.4. Information and Behavioral Change. 4.5. Quality Changes and Induced Price Effects. 4.5.1. Induced Price Changes. 4.6. Conclusions. 5. MEASURING WELFARE IN DISCRETE CHOICE MODELS. 5.1. Introduction. 5.2. The Basic Discrete Choice Model. 5.3. Welfare in the Random Utility Model. 5.3.1. More Welfare Calculations with the Linear Model. 5.3.2. Welfare Measurement with Imperfect Information. 5.4. Generalizing Discrete Choice Models. 5.4.1. Nested Models: Relaxing the IIA Property. 5.4.2. Mixed Logit Models: A Further Generalization. 5.5. The Larger Consumer Choice Problem. 5.5.1. The Role of Income. 5.5.2. The Frequency of Choice. 5.5.3. The Generalized Corner Solution Model. 5.6. The Hedonic Travel Cost Model. 5.6.1. The Structure of the Model. 5.6.2. The Hedonic Cost Function. 5.6.3. Making Sense of the Story. 5.6.4. Welfare Measures in the Hedonic Travel Cost Model. 5.7. Conclusion. 6. HEDONIC MODELS OF HETEROGENOUS GOODS. 6.1. Introduction. 6.2. The Theory of Hedonic Models. 6.2.1. Rosen's Bid Function. 6.2.2. The Hedonic Price Function. 6.3. Welfare Measures in Hedonic Markets. 6.3.1. Defining 'Pure Willingness to Pay'. 6.3.2. Revealing 'Pure Willingness to Pay'. 6.3.3. Welfare Effects of Exogenous Events. 6.4. Some Econometric Issues. 6.4.1. Estimating the Hedonic Price Function Only. 6.4.2. Recovering Information on Preferences. 6.5. The Housing Choice as a Discrete Choice. 6.5.1. Drawbacks of Discrete Choice Housing Models. 6.6. Conclusions. 7. HEDONIC WAGE ANALYSIS. 7.1. Introduction. 7.2. Hedonic Wages in Theory. 7.2.1. The Simple Model. 7.2.2. Revising the Model: The Wage vs Risk Trade-off. 7.2.3. Important Underlying Assumptions. 7.2.4. The Determinants of the Hedonic Function. 7.2.5. The Anomaly of Safer Jobs and Higher Pay. 7.2.6. Endogenous Sorting. 7.2.7. Welfare with the Hedonic Wage Model. 7.3. Estimating the 'Value of a Statistical Life'. 7.3.1. Data Sources for Wage and Risk Variables. 7.3.2. Variability in Specifications. 7.3.3. Fragility of Estimates of the Wage-Risk Trade-off. 7.3.4. The Challenge of Transferring $VSL$ Estimates. 7.4. Wage Hedonics and Locational Amenities. 7.4.1. The Roback Model. 7.4.2. Migration and Disequilibrium. 7.4.3. Welfare Interpretations. 7.4.4. Locational Amenities in a Discrete Choice Framework. 7.5. Conclusions. 8. PUBLIC GOODS IN HOUSEHOLD PRODUCTION. 8.1. Introduction. 8.2. The Structure of the Problem. 8.2.1. A Simple Result for Constant Marginal Costs. 8.3. Restrictions on the Demand for an Input. 8.3.1. The Case of a Separable Production Relationship. 8.3.2. Demand for Essential Inputs. 8.3.3. Weak Substitutability. 8.4. Bounds Using Defensive Expenditures. 8.4.1. Framing the Problem and Finding Marginal Values. 8.4.2. Bartik's Principal Results. 8.4.3. Actual Savings in Defensive Expenditures. 8.4.4. Lumpy Technologies and Discrete Choices. 8.5.Cost of Illness and Defensive Expenditure. 8.5.1. The Model with Cost of Illness. 8.5.2. Cost of Illness and Bartik's Results. 8.5.3. Mitigation and Costs of Illness. 8.6. Conclusions. 8.7. Appendices. 8.7.1. Appendix A: Comparative Statics for Cost Minimization. 8.7.2. Appendix B: Alternative Motivation for Bartik's Bounds. 9. THE ENVIRONMENT AS AN INPUT INTO FIRMS’ PRODUCTION. 9.1. Introduction. 9.2. Welfare Measures for Firm Owners. 9.2.1. Defining Welfare for the Firm. 9.2.2. Exact Welfare Measures for Price Changes. 9.2.3. Valuing Changes in an Environmental Input. 9.2.4. Aggregation and Market Interactions. 9.3. The Household as Producer. 9.3.1. Separability of Production and Consumption. 9.3.2. Welfare Effects of Price Changes with Separability. 9.3.3. Welfare Effects for the Environment as an Input. 9.4. Welfare Bounds and Approximations. 9.4.1. Approximations by Pricing Output Changes. 9.4.2. Approximating Welfare Changes Using Cost Data. 9.5. Examples of the Environment as an Input. 9.5.1. The Welfare Effects of Changes in Ozone Levels. 9.5.2. Welfare Effects in Fisheries. 9.6. Conclusions. 10. SOME BROADER CONSIDERATIONS. 10.1. The Territory Covered. 10.2. When Not To Do Valuation. 10.3. Stated or Revealed Preference? 10.4. Some Concluding Thoughts. 10.4.1. Behavioral Economics. 10.4.2. Valuing Ecosystem Services. REFERENCES. INDEX.

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