The Economic Valuation of the Environment and Public Policy

The Economic Valuation of the Environment and Public Policy

A Hedonic Approach

New Horizons in Environmental Economics series

Noboru Hidano

The importance of the hedonic valuation approach in public policy evaluation and environmental value estimation is now widely accepted. This book is especially designed to illustrate the basic assumptions of the hedonic approach and highlight the strengths and weaknesses associated with it. Combining rigorous theoretical analysis, detailed empirical studies and an extensive history of hedonic valuation, the book is both a good introductory text to the field and a precise yet comprehensive aid for professionals and practitioners alike.

Chapter 6: Comparison with Contingent Valuation Method

Noboru Hidano

Subjects: environment, environmental sociology, politics and public policy, public policy


MEANING OF COMPARISON In this chapter, we compare the value estimated by the hedonic price method and the values estimated by another method. As we discussed in the previous chapters, hedonic price measures should give us accurate information from theoretical and empirical viewpoints. However, it is difficult to ascertain the real values using only one method because each method has its shortcomings. We shall explain these cases by comparing the values of environmental goods obtained using the hedonic and the contingent valuation method. There has been little previous research on such a comparison. The most notable example is Brookshire et al.’s (1982) air pollution work, and there are other examples concerning earthquake risk in California, in the United States. We carried out a comparison study using an example of water environment in Japan (Hiramatsu and Hidano, 1989). The hedonic approach has already been accepted by major economists as a powerful tool for evaluating local public goods. Comparisons between the different valuation methods have, in the past, mainly been carried out in an attempt to justify the stated preference approach, rather than to justify the hedonic approach. The CVM value may include biases, which have been fully discussed by many authors, including Mitchell and Carson (1989), Hanley and Spash (1993), Garrod and Willis (1999), Hidano (1999), and Bateman and Willis (1999) and we should therefore take care when discussing the CVM results. A careful comparison of the hedonic with the CVM results should employ the ranges of the hedonic...

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