Techniques for
Measuring the Economic
Values of Recreation of
El Yunque
Dr. John Loomis
Dept. of Agricultural & Resource Economics
Colorado State University
&
Luis E. Santiago
University of Puerto Rico
Background design by JM Gonzalez
What are some types of
Economic Values?
• Human Use Values
– Human Health
– Recreational Enjoyment
What are some types of
Economic Values?
• Human Use Values
– Human Health
– Recreational Enjoyment
• Human Non-use Values
– Existence Value
– Bequest Value
How Do Economist Measure
Economic Values?
• The economic value to humans is
measured by the maximum amount of
money or other goods they would pay
• Price is a measure of what people
would pay for one more unit
• However, natural resources can have
economic value to people even if NO
cash flow or NO financial return
How Do Economist Measure
Non Market Values?
• The economic value to humans is measured
by the maximum amount of money or other
goods they would pay
• Price is a measure of what people would pay
for one more unit
• For non market goods like water quality or
public land recreation we have to estimate a
“shadow price” based on their willingness
to pay (WTP)
Economists do not Assign Values
• Non market valuation economists are
like detectives.
• We observe how humans make tradeoffs between recreation or
environmental quality and money
– Increased house prices near clean water
– Amount of money spent to visit a
recreation site
Methods to Measure Willingness to Pay
for Recreational Resources
• Urban setting:
– House price increases to be close to
beach, clean lake, forest, etc.
Property Value Enhancement From
Conservation & Restoration
• Hedonic Property Method is
used to quantify the increase in
property value arising from
conservation or restoration of
surrounding lands or water
• In California we found:
– +11 to 13% for Fish habitat
improvements & Env Ed
Trail
Methods to Measure Willingness to Pay
for Recreational Resources
• Urban setting:
– House price increases to be close to
beach, clean lake, forest, etc.
• Rural or Public Lands setting
– Travel Cost Method
• Variation in visitors travel costs are used to
trace out a demand curve
• From the demand curve we calculate net
willingness to pay or consumer surplus
Travel Cost Method Demand Curve and
Consumer Surplus
Travel Cost or Price $
/Unit or Trip
$90
Net Benefit to Consumer/visitor
$70
$50
$30
$20
Consumer Surplus
Travel Cost = $10
Demand Curve
Cost/Expenditures
1 2
3
4 5
6 7
8 9
# of Trips per year
Another Way Economists Estimate
Non Market Values
• For changes in environmental quality or
non-use values, there may be little
observable behavior…
– Economists construct a simulated market in a
survey, to ask people what they would pay if
there were a market or a voter referendum on
the protection of environmental quality or the
recreation site.
– Called the Contingent Valuation Method or
CVM
Stated Preference Recreation
Economic Models
• Contingent Valuation Model (CVM)
– Stated Preferences: Intended Behavior
– Obtains information on WTP of visitors
– Relates WTP responses to changes in site
characteristics
– Allows us to determine consumer’s
surplus directly
Empirical Application
• Location
– El Yunque, Caribbean
National Forest.
• Sites
– Visitors
• Espiritu Santo
• Mameyes
• Fajardo
• In person interviews
– Interviews were done during
summer 2005 & 2006.
– Questions included visitor
demographics, number of
visits and perceived site
conditions.
Need for Study
• Natural Resource Managers often need to
know:
– Value of Protecting Natural Features such as
Waterfalls from hydropower development
– Added value of providing visitor access to
Natural Features such as Waterfalls as road
construction to waterfall areas can be expensive
– Added value of providing trails at recreation
areas, as trail construction & maintenance is
also expensive
Purpose of Study
• To provide economic valuation
information on incremental value of
recreation with waterfalls and trails
• Illustrate how the Contingent
Valuation Method can be applied to
provide:
– An overall value of current recreation
– How that value changes with presence of
waterfalls and construction of hiking
trails
WTP Function
• WTPit = (A1i, . . . , Ani, D1i , . . . , Dni )
• WTPit = net benefits (willingness to pay) from recreation
experience
• A1i, . . . , Ani = built and natural site attributes such as
scenic views, the presence of waterfalls, availability of
parking spots and the presence of foot trails
• D1i, D2i , . . . , Dni = demographic characteristics of the
visitor, including gender, age, level of education, and
annual income
– i = individual respondent to survey
– t = date
17
Components of the Contingent
Valuation Simulated Market
• Item to be valued: recreation site
• Payment vehicle: recreation trip cost
• Time frame of payment: PER TRIP
18
Contingent Valuation
WTP Question
“if the cost of this visit to this river was
$____ more than what you have already
spent, would you still have come
today?”
– Bid amounts ranged from $1 to $200 per
trip.
Descriptive Statistics
River
Number of Observations
Espiritu Santo
Fajardo
Mameyes
164
235
593
2 of 7
sites
Natural and Built Site Variables
Presence of Waterfalls
3 of 5 sites
2 of 5 sites
Presence of Scenic Views
3 of 5 sites
3 of 5 sites 5 of 7 sites
Presence of Formal Trails
1 of 5 sites
0 of 5 sites 2 of 7 sites
20
Econometric Estimation of
WTP Function: Logit Model
• Probability (YES) =
{1 + exp[β0 - β1(X) + βA (A) + βD (D)]}
• Where:
• β0 = the intercept.
• β1 = the coefficient on the bid variable,
• X = the given bid amount,
• βA = the coefficient on the built and
natural site attributes (An), and
• βD = the coefficient on the demographic
variables (Dn).
21
Logit Model Statistical Results
Variable
Coefficient z-Statistic
Prob.
Constant
1.1375
5.572
0.000
BID ($)
-0.0094
-13.59
0.000
WATERFALL
0.2126
2.1485
0.032
FOOT TRAILS
0.1774
1.6924
0.091
EDUCATION
-0.0234
-1.6865
0.092
GENDER
0.1775
2.154
0.031
Internal Validity: Negative Coefficient on Bid Amount:
Higher $ asked to pay, lower probability visitor would pay.
22
Additional WTP per trip for Natural Features
derived from Logit Coefficients
Calculated by dividing the Attribute coefficient
by the coefficient on the Bid Amount ($)
W aterfall
$23.07
Foot Trails
$19.24
WTP for Visiting El Yunque
& for Natural Features
• The median net economic value of a
visit to the the rivers without
waterfalls or foot trails is $96.
• Recreation at rivers with both
waterfalls and foot trails has a
median value of $138 per trip.
• The presence of waterfalls accounts
for $23 and foot trails $19 per trip.
24
Policy Implications for Management
– Selecting recreation site locations.
– Protecting sites from competing uses,
such as locations with waterfalls, also
coveted by others for hydropower
development.
– Improving existing site facilities
• Only 3 of 17 sites have formal trails.
• Some sites, especially outside the CNF, don’t
have adequate parking, picnic areas , regular
trash collection.
25
Conclusions
• Non market valuation can help
eliminate the myth of
– The Economy vs the Environment
– The environment has economic value to
visitors and households that want to
protect the opportunity to visit in the
future
Conclusions
• Non market valuation can help
eliminate the myth of
– The Economy vs the Environment
– The environment has economic value to
visitors and households that want to
protect the opportunity to visit in the
future
– This non market value can be measured
using the Contingent Valuation Method
Conclusions
• El Yunque provides an economically
very valuable recreation experience to
visitors
• There is a substantial economic value
even if there is little direct cash flow to
the U.S. Forest Service
Questions?