Phi Phi Islands vs. Sardinia
Applications of CVM at Comparison
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
AGENDA
• Environment Valuation
– Contingent Valuation Method
• Papers Comparison
– Phi Phi Islands
– Geopark
– La Maddalena
– Gennargentu
• Main results
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
ENVIRONMENT VALUATION
• Environmental Amenities  Public Goods
– Non-excludability
– Non-rivalry
Market failure;
Need for government
intervention
• Cost-Benefit Analysis:
– People often undervalue environmental services
– Public authorities face limited budgets
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
ENVIRONMENT VALUATION (cont.)
• Total Economic Value:
TEV = UV + OV + NUV
– UV = Use Value (direct + indirect)
– OV = Option Value
– NUV = Non-use Value (bequest + existence)
• Indirect or Revealed Preference Method
– Travel Cost Method; Hedonic Pricing
– Observing the individual’s economic behaviour in a related market
• Direct or Stated Preference Method
– CVM, Attribute-based Method
– Surveying the individual on his/her WTP
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Contingent Valuation Method
• History
– 1947: proposed by Ciriacy-Wantrup
– 1963: used by Davis to estimate wilderness area value
– 1989: Ohio vs. Department of the Interior
• US government agencies allowed to recover damages
including non-use values
– 1989: Exxon Valdez oil spill in Alaska
– 1993: NOAA panel recommendations
– Today:
• Real estate appraisal technique;
• CBA for projects impacting environment
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Contingent Valuation Method (cont.)
• Elicitation Format
– Open-ended
– Bidding game
– Close-ended
(dichotomous choice)
• Single-bounded
• Double-bounded
• Advantages
– Estimate non-use values
– Estimate good not yet
available in definite form
– Applicable at varying
degrees of complexity
Giampaolo Buchicchio
501 00963 29
• Biases
– Incentive:
• Strategic
• Compliance
– Implied value
•
•
•
•
•
Starting point
Range
Relational
Importance
Position
– Scenario Misspecification
• Theoretical
• Amenity
• Context
Economic Valuation of Environmental and
Natural Resources
PAPERS COMPARISON
• Udomsak Seenprachawong (2004), “An Economic
Analysis of Coral Reefs in the Andaman Sea of Thailand”:
PHI PHI ISLANDS
• Strazzera, Brau, Balia and Atzeni (2002), “La disponibilità
a pagare e le preferenze dei turisti per i siti del Parco
Geominerario della Sardegna: il caso di Porto Flavia”:
GEOPARK
• Strazzera (2001), "Stima della domanda turistica nel
Parco Marino. della Maddalena: un'applicazione del
metodo della valutazione contingente“: LA MADDALENA
• Brau and Strazzera (1998), “Studio di valutazione
monetaria per il parco nazionale del Gennargentu.
Indagine preliminare”: GENNARGENTU
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Phi Phi Islands
• Located off the west coast of
Southern Thailand, between
the large island of Phuket and
the mainland
• Main islands:
– Phi Phi Don
– Phi Phi Leh
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Phi Phi Islands (cont.)
• Objectives
– Estimate recreational benefits
– Estimate the consumers’ WTP for improved coral reef
quality
• Methodology
– TCM + CVM; personal interviews
• Payment vehicle
– Contribution to a trust fund
• Elicitation format
– Single-bounded dichotomous choice
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Coral Reef Functions
• Direct use values (extractive)
– Food/other resources (fishery, mariculture, jewellery,
aquarium items)
– Construction material (sand, rocks)
– Pharmaceuticals and other industrial chemicals
• Direct use values (non-extractive)
– Tourism and recreation (diving, snorkelling)
– Education and scientific interest
• Indirect use values
– Biological support (breeding and feeding for offshore fish)
– Coastal protection (to prevent sand erosion)
– Fall-back life support system (during agricultural crises)
• Non-use values
– Genetic resources
– Global heritage
– Known and unknown future uses of the functions above
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Phi Phi Islands (cont.)
• Objectives
– Estimate recreational benefits
– Estimate the consumers’ WTP for improved coral reef
quality
• Methodology
– TCM + CVM; personal interviews
• Payment vehicle
– Contribution to a trust fund
• Elicitation format
– Single-bounded dichotomous choice
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Phi Phi Islands (cont.)
• Descriptive analysis
– Not performed in the paper
• Econometric analysis
– Random utility model
– Error modelled as a logistic
variable
– Parametric estimation of
coefficients
– Mean WTP
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Sardinia
• Second-largest island in the
Mediterranean Sea
• Special statute of autonomous
region under the Italian
Constitution
• Area 24,090 km²
• Pop. 1,655,677
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Geopark
• Geominerary Historic and Environmental
Park established by UNESCO in 1998
– 8 sites, all over Sardinia
– attractive mix of industrial mining
archeology and naturalistic landscapes
• Porto Flavia
– two-kilometer long visit,
both open-air and underground
• Second alternative scenario
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Geopark (cont.)
• Objectives
– Estimate direct use value
– Identify main characteristics of tourists interested in
visiting the Geopark
• Methodology
– CVM; personal interviews
• Payment vehicle
– Visit ticket
• Elicitation format
– Single-bounded dichotomous choice + open-ended
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Geopark (cont.)
• Descriptive analysis
– Large number of variables
– Bivariate analysis
• Contingency tables
• Econometric analysis
– Least squares method
– Logarithmic specification
• Wald test
• Adj.R2 comparisons
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
La Maddalena
• Rocky granitic island in the North Sardinia
• Marine Park created in 1994
– Area 15,000 ha
– Coastal perimeter 180 km
• Direct consumer demand
– Quantity
• days would spend in the area
– Price
• daily expense during current holiday
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
La Maddalena (cont.)
• Objectives
– Estimate variation in touristic demand
– Focus is on touristic-recreational use
value only
• Methodology
– CVM; personal interviews
• Payment vehicle
– None: vacation days, not WTP, are
elicited
• Elicitation format
– Open-ended
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
La Maddalena (cont.)
• Descriptive analysis
– Only for the significant
variables
• Econometric analysis
– Tobit model
• Non-neg. censored variable
– Log-linear specification
• Narrower confidence intervals
• Likelihood ratio test
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Gennargentu
• Mountain range, in the district of Nuoro
• Punta La Marmora: 1,834 m
• National Park created in 1998
~ resistances from local populations
• Heterogeneity of sample:3 sub-samples
– Locals
– Other Sardinians
– Mainland tourists
• Pilot survey
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Gennargentu (cont.)
• Objectives (Pilot Survey)
– Test elicitation format
– Gather information on WTP distribution
– Focus is on total economic value
• Methodology
– CVM; phone interviews
(sample unit: household)
• Payment vehicle
– Regional contribution
• Elicitation format
– Double-bounded dichotomous choice
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Gennargentu (cont.)
• Descriptive analysis
– Bivariate analysis
~ WTP not significantly related to any
socio-economic characteristic
• Econometric analysis
– Probit vs. Logit model
• Negative log-likelihood
– Linear vs. Log-linear specification
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
MAIN RESULTS
• Main object of analysis
– Environmental amenity
with cultural features in the Geopark case
• Main objective
– Estimate recreational direct use value
• Most popular elicitation format
– Single-bounded dichotomous choice
• Descriptive analysis
– Commonly performed in Sardinian studies
• Interest in tourists’ characteristics
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources
Q&A
THANK YOU!
Giampaolo Buchicchio
501 00963 29
Economic Valuation of Environmental and
Natural Resources