Techniques for Measuring the Economic Values of Recreation of El Yunque

1. Dr. John Loomis Dept. of Agricultural & Resource Economics Colorado State University & Luis E. Santiago University of Puerto Rico Background design by JM Gonzalez Techniques for Measuring the Economic Values of Recreation of El Yunque

2. What are some types of Economic Values? • Human Use Values • Human Health • Recreational Enjoyment

3. What are some types of Economic Values? • Human Use Values • Human Health • Recreational Enjoyment • Human Non-use Values • Existence Value • Bequest Value

4. How Do Economist Measure Economic Values? • The economic value to humans is measured by the maximum amount of money or other goods they would pay • Price is a measure of what people would pay for one more unit • However, natural resources can have economic value to people even if NO cash flow or NO financial return

5. How Do Economist Measure Non Market Values? • The economic value to humans is measured by the maximum amount of money or other goods they would pay • Price is a measure of what people would pay for one more unit • For non market goods like water quality or public land recreation we have to estimate a “shadow price” based on their willingness to pay (WTP)

6. Economists do not Assign Values • Non market valuation economists are like detectives. • We observe how humans make trade-offs between recreation or environmental quality and money • Increased house prices near clean water • Amount of money spent to visit a recreation site

7. Methods to Measure Willingness to Pay for Recreational Resources • Urban setting: • House price increases to be close to beach, clean lake, forest, etc.

8. Property Value Enhancement From Conservation & Restoration • Hedonic Property Method is used to quantify the increase in property value arising from conservation or restoration of surrounding lands or water • In California we found: • +11 to 13% for Fish habitat improvements & Env Ed Trail

9. Methods to Measure Willingness to Pay for Recreational Resources • Urban setting: • House price increases to be close to beach, clean lake, forest, etc. • Rural or Public Lands setting • Travel Cost Method • Variation in visitors travel costs are used to trace out a demand curve • From the demand curve we calculate net willingness to pay or consumer surplus

10. Travel Cost Method Demand Curve and Consumer Surplus Travel Cost or Price $ /Unit or Trip $90 Net Benefit to Consumer/visitor $70 $50 $30 Consumer Surplus $20 Travel Cost = $10 Demand Curve Cost/Expenditures # of Trips per year 1 2 3 4 5 6 7 8 9

12. Another Way Economists Estimate Non Market Values • For changes in environmental quality or non-use values, there may be little observable behavior… • Economists construct a simulated market in a survey, to ask people what they would pay if there were a market or a voter referendum on the protection of environmental quality or the recreation site. • Called the Contingent Valuation Method or CVM

13. Stated Preference Recreation Economic Models • Contingent Valuation Model (CVM) • Stated Preferences: Intended Behavior • Obtains information on WTP of visitors • Relates WTP responses to changes in site characteristics • Allows us to determine consumer’s surplus directly

14. Empirical Application • Location • El Yunque, Caribbean National Forest. • Sites • Visitors • Espiritu Santo • Mameyes • Fajardo • In person interviews • Interviews were done during summer 2005 & 2006. • Questions included visitor demographics, number of visits and perceived site conditions.

15. Need for Study • Natural Resource Managers often need to know: • Value of Protecting Natural Features such as Waterfalls from hydropower development • Added value of providing visitor access to Natural Features such as Waterfalls as road construction to waterfall areas can be expensive • Added value of providing trails at recreation areas, as trail construction & maintenance is also expensive

16. Purpose of Study • To provide economic valuation information on incremental value of recreation with waterfalls and trails • Illustrate how the Contingent Valuation Method can be applied to provide: • An overall value of current recreation • How that value changes with presence of waterfalls and construction of hiking trails

17. WTP Function • WTPit = (A1i, . . . , Ani, D1i , . . . , Dni ) • WTPit = net benefits (willingness to pay) from recreation experience • A1i, . . . , Ani = built and natural site attributes such as scenic views, the presence of waterfalls, availability of parking spots and the presence of foot trails • D1i, D2i , . . . , Dni = demographic characteristics of the visitor, including gender, age, level of education, and annual income • i = individual respondent to survey • t = date 17

18. Components of the Contingent Valuation Simulated Market • Item to be valued: recreation site • Payment vehicle: recreation trip cost • Time frame of payment: PER TRIP 18

19. Contingent Valuation WTP Question “if the cost of this visit to this river was $____ more than what you have already spent, would you still have come today?” • Bid amounts ranged from $1 to $200 per trip.

20. Descriptive Statistics 20

21. Econometric Estimation of WTP Function: Logit Model • Probability (YES) = {1 + exp[β0 - β1(X) + βA (A) + βD (D)]} • Where: • β0 = the intercept. • β1 = the coefficient on the bid variable, • X = the given bid amount, • βA = the coefficient on the built and natural site attributes (An), and • βD = the coefficient on the demographic variables (Dn). 21

22. Logit Model Statistical Results Internal Validity: Negative Coefficient on Bid Amount: Higher $ asked to pay, lower probability visitor would pay. 22

23. Additional WTP per trip for Natural Features derived from Logit Coefficients Calculated by dividing the Attribute coefficient by the coefficient on the Bid Amount ($)

24. WTP for Visiting El Yunque & for Natural Features The median net economic value of a visit to the the rivers without waterfalls or foot trails is $96. Recreation at rivers with both waterfalls and foot trails has a median value of $138 per trip. The presence of waterfalls accounts for $23 and foot trails $19 per trip. 24

25. Policy Implications for Management • Selecting recreation site locations. • Protecting sites from competing uses, such as locations with waterfalls, also coveted by others for hydropower development. • Improving existing site facilities • Only 3 of 17 sites have formal trails. • Some sites, especially outside the CNF, don’t have adequate parking, picnic areas , regular trash collection. 25

26. Conclusions • Non market valuation can help eliminate the myth of • The Economy vs the Environment • The environment has economic value to visitors and households that want to protect the opportunity to visit in the future

27. Conclusions • Non market valuation can help eliminate the myth of • The Economy vs the Environment • The environment has economic value to visitors and households that want to protect the opportunity to visit in the future • This non market value can be measured using the Contingent Valuation Method

28. Conclusions • El Yunque provides an economically very valuable recreation experience to visitors • There is a substantial economic value even if there is little direct cash flow to the U.S. Forest Service

29. Questions?