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Non-Market valuation: Travel Cost

Non-Market valuation: Travel Cost Dr John Tisdell Readings Ward, F.A. and D. Beal (2000). Valuing Nature with Travel Cost Models: A Manual . Edward Elgar, Cheltenham, U.K.Chapter 2.

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Non-Market valuation: Travel Cost

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  1. Non-Market valuation:Travel Cost Dr John Tisdell

  2. Readings • Ward, F.A. and D. Beal (2000). Valuing Nature with Travel Cost Models: A Manual. Edward Elgar, Cheltenham, U.K.Chapter 2. • Hanley, N. and C.L. Spash (1993). Cost-Benefit Analysis and the Environment. Edward Elgar, Cheltenham, U.K. Chapter 5.

  3. Introduction • Notion: The basic premise of the approach is that the cost of travel is a proxy for the value of a recreational site. The number or trips and so travel expenditure will decrease as distance increases.

  4. Development • Hotelling (1947) US National Parks. • Clawson and Knetch (1966) developed the zonal methodology. • Measurement of cost at a zonal level • A group from the same area would pay marginally more if moved to another zone. • Development since the 1960’s • Individual travel cost analysis • Value of time – opportunity cost – opportunity cost of travel time. • Incorporating multi-site or multi-purpose trips. • Smith (1971) marginal cost of travel from last site…. Possible biases. • Stoeckl (1993) suggested proportioning the cost according to perceived importance. • The effect of substitutes • Ribaudo and Epp (1984) found strong correlation between substitute sites. • Visit length • Site quality and recreation congestion

  5. Individual and Zonal Methods • Zonal method requirements: • Limited to secondary data – trail registrations or camping permits. • The characteristics of the population are the same from one distance zone ot another. • Trips are of uniform duration and for a single purpose • Individuals travel the same distance and time. • Individual method requirements: • most visitors need to make more than one visit per year (time period). • Data has to be collected from surveys – often not possible due to budget/time/isolation factors.

  6. Zonal Method Steps: • Collect secondary data on visitor characteristics • Construct 1st stage demand curve • Estimate a site demand data • Construct a 2nd stage demand curve (Resource demand curve) • Convert travel distances to dollars

  7. Assume the following camp ground registration data were collected from from a site on the Darling Downs : Per Capita Demand for Visitors to a Camp Ground on the Darling Downs

  8. 1st stage demand Curve 200 Distance Warwick 150 Dalby 100 Toowoomba 50 Trips per capita 0.1 0.2 0.3

  9. Site demand Curve The premise of the zonal method is that the origins are homogeneous. In other words, if someone moved from Toowoomba to Warwick they would visit as often as the others living at Warwick.

  10. 2nd stage demand Curve 150 Distance added 100 50 Total Trips per year 10000 21000 35000

  11. Monetary conversion Transportation costs Federal government rates ($ 1.20 per Km) Average number in car ( 3 people) Travel time guidelines suggest accounting for travel time, but this is highly correlated with distance Combine cost of travel and wages in zonal study Assume the average hourly wage rate is $20 and cars travel at an average of 50km/hr.

  12. Estimates Distance 50 = ((50 x $1.20) + (3 x $20.00))/50 = 2.40 Distance 100 = ((100 x $1.20) + (3 x $20.00))/50 = 3.60 Distance 150 = ((150 x $1.20) + (3 x $20.00))/50 = 4.80

  13. Aggregate Monetary Demand Added dollars 4.80 3.60 2.40 35,000 10,000 21,000 Trips per year

  14. Assumptions • Single destination trips and zero benefit from travel • Homogeneous demand within zones • Constant wage rates • Constant travel times and costs • Transferable benefit and cost functions

  15. Next lecture • Relaxing the assumptions • Individual travel cost methods • Empirical examples.

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