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Chapter 3: A Hedonic Price Model of Coral Reef Quality in Hawaii
Roy Brouwer, Sebastiaan Hess, Yi Liu, Pieter van Beukering and Sonia Garcia 1 INTRODUCTION Coral reefs have significant economic value (for example, Brander et al., 2007). They are, however, under imminent threat worldwide, from processes such as coral bleaching, especially as a result of climate change. Twenty per cent of the world’s coral reefs have been effectively already destroyed and another 50 per cent are under serious threat (Wilkinson, 2004). Most economic valuation studies of coral reefs focus on their recreational benefits derived from activities such as snorkelling and diving, and the income generation from associated tourism. Coral reefs also provide important nursery habitats and hence are a source of income for the commercial fishing industry (for example, McConnell and Strand, 2000). This study examines whether a value relationship can also be detected between coral reefs and house prices using a hedonic price model. Such a relationship has not yet been established in the coral reef valuation literature. Hedonic price models are more widely used to assess the impact of living near the waterfront and the impact of beach quality on coastal residential property (for example, Pompe and Rinehart, 1995). The main objective of this chapter is to estimate a hedonic price model for residential property in Hawaii and test the impact of coral reef quality and proximity on property values. The Hawaiian Islands are surrounded by 1180 square kilometres of coral reefs of different sizes, structure, density and quality. Based on a statistical analysis of available property sales data...
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