Abstract
The valuation of water quality has proved difficult for economists using hedonic methods. This study, by employing a sample of lakes and considering only land values, is able to overcome many methodological and empirical problems inherent in previous studies. One objective measure of water quality, secchi disc reading, is found to be significant for various alternative specifications of the hedonic model. As explained, however, the results suggest that economic value may be attached to a perceived, rather than actual, measure of water quality. This raises fundamental questions as to how economists and natural scientists can work together to formulate public policy regarding water quality.
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An earlier version of this paper was presented at the annual meetings of the Western Regional Science Association. This research was supported, in part, by grants from the Minnesota Legislative Committee on Minnesota Resources and the University of Minnesota Computer Center. The cooperation of the Minnesota Department of Natural Resources in supplying data is gratefully acknowledged as is the able research assistance of Wade Oman through the Undergraduate Research Opportunities Program. Comments provided by J. Knetsch and W. Sinclair on an earlier draft are gratefully acknowledged. Nonetheless, the author remains solely responsible for the opinions and conclusions expressed in this paper.
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Steinnes, D.N. Measuring the economic value of water quality. Ann Reg Sci 26, 171–176 (1992). https://doi.org/10.1007/BF02116368
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DOI: https://doi.org/10.1007/BF02116368