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The Importance of the Market Area Determination for Estimating Aggregate Benefits of Public Goods: Testing Differences in Resident and Nonresident Willingness to Pay

Published online by Cambridge University Press:  15 September 2016

John B. Loomis  and
Armando Gonzalez-Caban
John B. Loomis
Affiliation:
Department of Agricultural and Resource Economics at Colorado State University
Armando Gonzalez-Caban
Affiliation:
USDA Forest Service in Riverside, California
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Abstract

A combined telephone contact-mail booklet-telephone interview of California and New England households regarding their willingness to pay for fire management in California and Oregon's old-growth forests was performed to test hypotheses regarding the spatial extent of the public goods market. Using a multiple-bounded contingent valuation question, the study found that New England households' annual willingness to pay for the California and Oregon programs was statistically different from zero. This analysis points out that households receive benefits from fire protection of old-growth forests in states other than their own. In this case study, limiting the survey sample to state residents where the National Forest is located would reflect about 20% of the national benefits. However, using resident values as a proxy for nonresidents would overstate the national benefits by 75%, since the values per household are significantly different. This finding suggests more emphasis in future surveys on selecting an institutionally and economically relevant sample frame rather than an expedient one.

Type
Articles
Information
Agricultural and Resource Economics Review , Volume 25 , Issue 2 , October 1996 , pp. 161 - 170
Copyright
Copyright © 1996 Northeastern Agricultural and Resource Economics Association 

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