Skip to main content
SpringerLink
Log in

Valuing the Environment as Input, Ecosystem Services and Developing Countries

  • Published:
Environmental and Resource Economics Aims and scope Submit manuscript

Abstract

In outlining how “valuing the environment as input” could be applied to a number of contexts in low and middle-income countries, Karl-Göran Mäler laid the foundation for many additional applications of the production function approach as reported (Mäler in Valuing environmental benefits in developing countries. Special Report 29, Michigan State University, pp 11–32. 1991). The following review traces how his contribution has helped spawn a large literature on valuing ecosystem services as applied in low and middle-income countries. We examine a number of case studies illustrating such approaches. We also note growing interest in two important applications in low and middle-income countries: the hydrological function of forested watersheds and the storm protection provided by estuarine and coastal ecosystems. Using the example of storm protection by mangroves, we further explore the role of spatial characteristics in influencing the value attributed to this benefit.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. The theoretical foundations for such applications in developing countries had been described conceptually. See, for example, Dasgupta (1982) and Dasgupta and Mäler (1990).

  2. At the time, there were a growing number of studies in low and middle = income countries that had begun extending cost–benefit analysis to include environmental impacts, including on production activities. See, for example, Hufschmidt et al. (1983), Dixon and Hufschmidt (1986), Barbier (1988) and Dixon et al. (1988).

  3. As pointed out by Sterner and Coria (2012), the growing number of case studies of environmental valuation has been important for policy making in low and middle-income countries.

  4. Note that, for the purposes of this review, the overview of the methodology of the production function approach in this section is necessarily succinct and basic. It should also be recognized that the “production function” method encompasses a larger suite of interrelated functions, including cost, profit, output supply and input demand functions. More comprehensive and advanced descriptions of the general methodology can be found elsewhere (e.g., see Freeman and Harrington 1990; Point 1994; Huang and Smith 1998; McConnell and Bockstael 2005; Freeman et al 2014). For more detailed discussion of the application of this methodology to ecosystem services and other environmental impacts in developing countries, see Barbier (1994 and 2007) and Vincent (2011).

  5. See Bockstael and McConnell (2005) and Freeman et al. (2014) for an overview of the methodology and various applications of valuation techniques based on the household production function approach. One early application of this approach has been to the problem of fuelwood collection by poor rural households in Nepal; see Amacher et al. (1993 and 1996), Bluffstone (1995) and Cooke (1998), and for more recent applications, Adhikari et al. (2004) and Baland et al. (2010).

  6. Note that this compensation is in terms of the conditional expenditure function, which is the minimum expenditure that the individual needs to obtain the optimal amount of goods and services consumed \(q_{1} ,...,q_{n}\), given their prices, initial utility level \(U^{0}\) and some initial level of the ecosystem service input \(S^{0}\). The other welfare approach for valuing quantity changes is equivalent surplus. See Freeman et al. (2014) for further details.

  7. For instance, using coastal wetland area as a proxy for habitat and nursery support for fisheries has a long tradition. See, for example, Batie and Wilson (1978), Lynne et al. (1981) and Ellis and Fisher (1987).

  8. For further discussion, see Bockstael and McConnell (2005) and Freeman et al. (2014). For examples of the importance of applying dynamic production functions methods to valuing mangroves support for off-shore fisheries in developing countries, see Barbier (2000 and 2007), Sanchirico and Mumby (2009) and Sanchirico and Springborn (2011). For an application to forest-based ecosystem services from a watershed in Panama, see Fenichel et al. (2019).

  9. According to Mahmud and Barbier (2016, p. 768), “Self-protection expenditures are actions that decrease the probability of a hazardous storm event occurring that inflicts property damages, whereas self-insurance expenditures are actions undertaken by the household to reduce its losses in the event of storm-inflicted damages.

    For coastal households in Bangladesh, examples of self-protection include converting a mud-built house to brick, raising the height of the homestead, moving the house inside an embankment, and locating further away from the shoreline to a safer place. Examples of self-insurance include income source diversification, crop and plot diversification, private transfers in terms of remittances and charities, reciprocal gift exchanges, and inter and intra-household income transfers (for informal risk sharing).”.

References

  • Acharya G, Barbier EB (2002) Using domestic water analysis to value groundwater recharge in the hadejia-jama’are floodplain, northern Nigeria. Am J Agr Econ 84:415–426

    Article  Google Scholar 

  • Adams RM (1986) Agriculture, forestry and related benefits of air pollution control: a review and some observations. Am J Agr Econ 68:464–472

    Article  Google Scholar 

  • Adhikari B, Di Falco S, Lovett JC (2004) Household Characteristics and forest dependency: evidence from common property management in Nepal. Ecol Econ 48:245–257

    Article  Google Scholar 

  • Amacher GS, Hyde WF, Joshee BR (1993) Joint production and consumption in traditional households: Fuelwood and crop residues in two districts in Nepal. J Dev Stud 30:206–225

    Article  Google Scholar 

  • Amacher GS, Hyde WF, Kanel KR (1996) Household fuelwood demand and supply in Nepal’s Tarai and Mid-Hills: choice between cash outlays and labor opportunity. World Dev 24:1725–1736

    Article  Google Scholar 

  • Amadu M, Ayamga M, Mabe FN (2020) Assessing the value of forest resources to rural households: a case of forest-fringe communities in the Northern Region of Ghana. Environmental Development, in press, 100577.

  • Angelsen A, Dokken T (2018) Climate exposure, vulnerability and environmental reliance: a cross-section analysis of structural and stochastic poverty. Environ Dev Econ 23:257–278

    Article  Google Scholar 

  • Ashagre BB, Platts PJ, Njano M, Burgess ND, Balmford A, Turner RK, Schaafsma M (2018) Integrated modelling for economic valuation of forests and woodlands in drinking water provision to two African cities. Ecosyst Serv 32:50–61

    Article  Google Scholar 

  • Auffhammer M, Ramanathan V, Vincent JR (2006) Integrated model shows that atmospheric brown clouds and greenhouse gases have reduced rice harvests in India. Proc Nat Acad Sci 103:19668–19672

    Article  Google Scholar 

  • Aylward B, Echeverría J (2001) Synergies between livestock production and hydrological function in Arenal, Costa Rica. Environ Dev Econ 6:359–381

    Article  Google Scholar 

  • Babulo B, Muys B, Nega F, Tollens E, Nyssen J, Deckers J, Mathijs E (2009) The economic contribution of forest resource use to rural livelihoods in Tigray, Northern Ethiopia. Forest Policy Econ 11:109–117

    Article  Google Scholar 

  • Badola R, Hussain SA (2005) Valuing ecosystems functions: an empirical study on the storm protection function of Bhitarkanika mangrove ecosystem, India. Environ Conserv 32:85–92

    Article  Google Scholar 

  • Baland J-M, Bardhan P, Das S, Mookherjee D, Sarkar R (2010) The environmental impact of poverty: evidence from firewood collection in rural Nepal. Econ Dev Cult Change 59:23–61

    Article  Google Scholar 

  • Barbier EB (1988) Economic valuation of environmental impacts. Project Appraisal 3(3):143–150

    Article  Google Scholar 

  • Barbier EB (1994) Valuing environmental functions: tropical wetlands. Land Econ 70:155–173

    Article  Google Scholar 

  • Barbier EB (2000) Valuing the environment as input: applications to mangrove-fishery linkages. Ecol Econ 35(47–61):60

    Google Scholar 

  • Barbier EB (2007) Valuing ecosystems as productive inputs. Economic Policy 22:177–229

    Article  Google Scholar 

  • Barbier EB (2012) A spatial model of coastal ecosystem services. Ecol Econ 78:70–79

    Article  Google Scholar 

  • Barbier EB, Hochard JP (2018) the impacts of climate change on the poor in disadvantaged regions. Rev Environ Econ Policy 12:26–47

    Article  Google Scholar 

  • Barbier EB, Strand I (1998) Valuing mangrove-fishery linkages: a case study of Campeche, Mexico. Environ Resource Econ 12:151–166

    Article  Google Scholar 

  • Barrios S, Bertinelli L, Strobl E (2010) Trends in rainfall and economic growth in Africa: a neglected cause of the Africa growth tragedy. Rev Econ Stat 92:350–366

    Article  Google Scholar 

  • Batie SS, Wilson JR (1978) Economic values attributable to virginia’s coastal wetlands as inputs in oyster production. South J Agric Econ 10:111–118

    Google Scholar 

  • Bluffstone R (1995) The effect of labor market performance on deforestation in developing countries under open access: an example from rural Nepal. J Environ Econ Manag 29:42–63

    Article  Google Scholar 

  • Cooke P (1998) The effect of environmental good scarcity on own-farm labor allocation: the case of agricultural households in Nepal. Environ Dev Econ 3:443–469

    Article  Google Scholar 

  • Cuervo-Sánchez R, Maldonado JH, Rueda M (2018) Spillover from marine protected areas on the pacific coast in Colombia: A bioeconomic modelling approach for shrimp fisheries. Mar Policy 88:182–188

    Article  Google Scholar 

  • Das S, Crépin A-S (2013) Mangroves can provide against wind damage during storms. Estuar Coast Shelf Sci 134:98–107

    Article  Google Scholar 

  • Das S, Vincent JR (2009) Mangroves protected villages and reduced death toll during Indian super cyclone. Proc Natl Acad Sci 106:7357–7360

    Article  Google Scholar 

  • Dasgupta P (1982) The control of resources. Harvard University Press, Cambridge, MA

    Google Scholar 

  • Dasgupta P (2021) The economics of biodiversity: the dasgupta review. HM Treasury, London

    Google Scholar 

  • Dasgupta P, Mäler K-G (1990) The environment and emerging development issues. World Bank Econ Rev 4:101–132

    Article  Google Scholar 

  • Dasgupta S, Islam MS, Huq M, Huque Khan Z, Hasib MR (2019) Quantifying the protective capacity of mangroves from storm surges in coastal Bangladesh. PloS One 14(3):e0214079

  • del Valle A, Eriksson M, Ishizawa OA, Miranda JJ (2020) Mangroves protect coastal economic activity from hurricanes. Proc Natl Acad Sci 117:265–270

    Article  Google Scholar 

  • Dixon JA, Hufschmidt MM (eds) (1986) Economic valuation techniques for the environment: a case study workbook. Johns Hopkins University Press, Baltimore

    Google Scholar 

  • Dixon JA, Scura LF, Carpenter RA, Sherman PB (1988) Economic analysis of environmental impacts. Published in Association with the Asian Development Bank and the World Bank. Earthscan, London.

  • Ehrlich PR, Mooney HA (1983) Extinction, substitution, and ecosystem services. Bioscience 33(4):248–254

    Article  Google Scholar 

  • Ellis GM, Fisher AC (1987) Valuing the environment as input. J Environ Manage 25:149–156

    Google Scholar 

  • Farber S (1987) The value of coastal wetlands for protection of property against hurricane wind damage. J Environ Econ Manag 14:143–151

    Article  Google Scholar 

  • Fenichel EPW, Adamowicz MSA, Hall JS (2019) Incentive systems for forest-based ecosystem services with missing financial service markets. J Assoc Environ Resour Econ 6:319–347

    Google Scholar 

  • Forster DL, Bardos CP, Southgate DD (1987) Soil erosion and water treatment costs. J Soil Water Conserv 42(5):349–352

    Google Scholar 

  • Freeman AM III, Harrington W (1990) Measuring welfare values of productivity changes. South Econ J 56:892–904

    Article  Google Scholar 

  • Freeman AM III, Herriges JA, Kling CL (2014) The Measurement of Environmental and Resource Values: Theory and Methods, 3rd edn. Routledge, London

    Book  Google Scholar 

  • Hallegatte S, Bangalore M, Bonanigo L, Fay M, Kane T, Narloch U, Rozenberg J, Treguer D, Vogt-Schilb A (2016) Shock Waves: Managing the Impacts of Climate Change on Poverty. The World Bank, Washington, D.C.

    Book  Google Scholar 

  • Hallegatte S, Fay M, Barbier EB (2018) Poverty and climate change: introduction. Environ Dev Econ 23:217–233

    Article  Google Scholar 

  • Hanley N (1990) The economics of nitrate pollution. Eur Rev Agric Econ 17:129–151

    Article  Google Scholar 

  • Hochard JP, Hamilton S, Barbier EB (2019) Mangroves shelter coastal economic activity from cyclones. Proc Natl Acad Sci 116:12232–12237

    Article  Google Scholar 

  • Holmes TP (1988) The offsite impact of soil erosion on the water treatment industry. Land Econ 64(4):356–366

    Article  Google Scholar 

  • Huang J-H, Smith VK (1998) Weak complementarity and production. Econ Lett 60:329–333

    Article  Google Scholar 

  • Hufschmidt MM, James DE, Meister AD, Bower BT, Dixon JA (1983) Environment, natural systems and development: an economic valuation guide. Johns Hopkins University Press, Baltimore

  • Huxham M, Emerton L, Kairo J, Munyi F, Abdirizak H, Muriuk T, Nunan F, Briers RA (2015) Applying climate compatible development and economic valuation to coastal management: a case study of Kenya’s mangrove forests. J Environ Manage 157:168–181

    Article  Google Scholar 

  • Islam M, Braden JB (2006) Bio-economic development of floodplains: farming versus fishing in Bangladesh. Environ Dev Econ 11:95–126

    Article  Google Scholar 

  • Kahn JR (1987) Measuring the economic damages associated with terrestrial pollution of marine ecosystems. Mar Resour Econ 4:193–209

    Article  Google Scholar 

  • Kahn JR, Kemp WM (1985) Economic losses associated with the degradation of an ecosystem: the case of submerged aquatic vegetation in Chesapeake Bay. J Environ Econ Manag 12:246–263

    Article  Google Scholar 

  • Kerna A, Colby B, Zamora F (2017) Cultural and recreational values for environmental flowss in Mexico’s Colorado river delta. Water Economics and Policy 3:1650035. https://doi.org/10.1142/S2382624X16500351

    Article  Google Scholar 

  • Köhlin G, Amacher GS (2005) Welfare implications of community forest plantations in developing countries: the Orissa social forestry project. Am J Agr Econ 87:855–869

    Article  Google Scholar 

  • Kopp RJ, Krupnik AJ (1987) Agricultural policy and the benefits of ozone control. Am J Agr Econ 69:956–962

    Article  Google Scholar 

  • LasoBayas JC, Marohn C, Dercon G, Dewi S, Piepho HP, Joshi L, van Noordwijk M, Cadisch G (2011) Influence of coastal vegetation on the 2004 tsunami wave impact Aceh. Proc Natl Acad Sci 108:18612–18617

    Article  Google Scholar 

  • Luintel H, Bluffstone RA, Scheller RM (2018) The effects of the Nepal community forestry program on biodiversity conservation and carbon storage. PLoS ONE 13(6):e0199526. https://doi.org/10.1371/journal.pone.0199526

    Article  Google Scholar 

  • Lynne GD, Conroy P, Prochaska FJ (1981) Economic valuation of marsh areas for marine production processes. J Environ Econ Manag 8:175–186

    Article  Google Scholar 

  • Mahmud S, Barbier EB (2016) Are private defensive expenditures against storm damages affected by public programs and natural barriers? Evidence from the coastal areas of Bangladesh. Environ Dev Econ 21:767–788

    Article  Google Scholar 

  • Mäler K-G (1974) Environmental economics: a theoretical inquiry. Johns Hopkins University Press for Resources for the Future, Baltimore

    Google Scholar 

  • Mäler KG (1991) Production function approach in developing countries. In: Vincent JR, Crawford EW, Hoehn JP (eds.) Valuing environmental benefits in developing countries. Special Report 29, Michigan State University, pp 11–32.

  • McConnell KE, Bockstael NE (2005) Valuing the environment as a factor of production. Chapter 14 In: Mäler KG, Vincent JR (eds.) Handbook of environmental economics, Volume 2: Valuing environmental changes. North-Holland, Amsterdam, pp 621–669

  • Menéndez P, Losada IJ, Beck MW, Torres-Ortega S, Espejo A, Narayan S, Díaz-Simal P, Lange G-M (2018) Valuing the protection services of mangroves at national scale: The Philippines. Ecosyst Serv 34:24–36

    Article  Google Scholar 

  • Menéndez P, Losada IJ, Torres-Ortega S, Narayan S, Beck MW (2020) The global flood protection benefits of mangroves. Sci Rep 10:1–11. https://doi.org/10.1038/s41598-020-61136-6

    Article  Google Scholar 

  • Moore WB, McCarl BA (1987) Off-site costs of soil erosion: a case study in the Willamette Valley. Western J Agric Econ 12(1):42–49

    Google Scholar 

  • Noack F, Catherine Riekhof M, Di Falco S (2019) Droughts, biodiversity, and rural incomes in the tropics. J Assoc Environ Res Econ 6(4):823–852

    Google Scholar 

  • Pascal N, Allenbach M, Brathwaite A, Burke L, Le Port G, Clua E (2016) Economic valuation of coral reef ecosystem service of coastal protection: A pragmatic approach. Ecosyst Serv 21:72–80

    Article  Google Scholar 

  • Pattanayak SK, Kramer RA (2001) Worth of watersheds: a producer surplus approach for valuing drought mitigation in Eastern Indonesia. Environ Dev Econ 6:123–146

    Article  Google Scholar 

  • Point P (1994) The value of non-market natural assets as production factor. Chapter 2 In: Pethig R (ed.), Valuing the environment: methodological and measurement issues. Springer, Dordrecht, pp. 23–57.

  • Robinson EJZ (2016) Resource-dependent livelihoods and the natural resource base. Ann Rev Resourc Econ 8:281–301

    Article  Google Scholar 

  • Sanchirico JN, Mumby P (2009) Mapping ecosystem functions to the valuation of ecosystem services: implications of species-habitat associations for coastal land-use decisions. Thyroid Res 2:67–77

    Google Scholar 

  • Sanchirico JN, Springborn M (2012) How to get there from here: ecological and economic dynamics of ecosystem service provision. Environ Resource Econ 48:243–267

    Article  Google Scholar 

  • Siikamäki J, Sanchirico JN, Jardine SL (2012) Global economic potential for reducing carbon dioxide emissions from mangrove loss. Proc Natl Acad Sci 109:14369–14374

    Article  Google Scholar 

  • Simonit S, Perrings C (2011) Sustainability and the value of the ‘regulating’ services: Wetlands and water quality in Lake Victoria. Ecol Econ 70:1189–1199

    Article  Google Scholar 

  • Singh S, Mishra A (2014) Deforestation-induced costs on the drinking water supplies of the Mumbai metropolitan, India. Glob Environ Chang 27:73–83

    Article  Google Scholar 

  • Sterner T, Coria J (2012) Policy instruments for environmental and natural resource management, 2nd edn. Routledge, London

    Google Scholar 

  • Tibesigwa B, Siikamäki J, Lokina R, Alvsilver J (2019) Naturally available wild pollination services have economic value for nature dependent smallholder crop farms in Tanzania. Sci Rep 9:3434. https://doi.org/10.1038/s41598-019-39745-7

    Article  Google Scholar 

  • van Zanten BT, van Beukering PJH, Wagtendonk AJ (2014) Coastal protection by coral reefs: a framework for spatial assessment and economic valuation. Ocean Coast Manag 96:94–103

    Article  Google Scholar 

  • Vázquez-González C, Moreno-Casasolo P, Peralta Peláez LA, Monroy P, Espejel I (2019) The value of coastal flood protection lost to urbanization on the coastal plain of the Gulf of Mexico: An analysis of flood damage by hurricane impacts. Int J Disast Risk Reduct 37:101180

    Article  Google Scholar 

  • Vincent JR (2011) Valuing the environment as a production input. Chapter 3 In: Haque AKE, Murty MN, Shyamsundar P (eds.) Environmental valuation in South Asia. Cambridge University Press, pp 36–78

  • Vincent JR, Ahmad I, Adnan N, Burwell WB III, Pattanayak SK, Tan-Soo J-S, Thomas K (2016) Valuing water purification by forests: an analysis of malaysian panel data. Environ Resource Econ 64:59–80

    Article  Google Scholar 

  • Xepapadeas A, de Zeeuw A (2020) Obituary: Karl-Göran Mäler. Environ Resource Econ 76:195–200

    Article  Google Scholar 

  • Zavari E, Russ J, Damania R (2020) Rainfall anomalies are a significant driver of cropland expansion. Proc Natl Acad Sci 117:10225–10233

    Article  Google Scholar 

Download references

Acknowledgements

We are grateful to Thomas Sterner, Ian Bateman and two anonymous reviewers for their helpful comments.

Author information

Authors and Affiliations

  1. Department of Economics, Colorado State University, Fort Collins, CO, 80523-1771, USA

    Edward B. Barbier, Angela Cindy Emefa Mensah & Michelan Wilson

Authors
  1. Edward B. Barbier
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Angela Cindy Emefa Mensah
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Michelan Wilson
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Edward B. Barbier.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Barbier, E.B., Mensah, A.C.E. & Wilson, M. Valuing the Environment as Input, Ecosystem Services and Developing Countries. Environ Resource Econ 84, 677–694 (2023). https://doi.org/10.1007/s10640-021-00570-0

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10640-021-00570-0

Keywords

JEL classification

Search

Navigation