The Economic Value of Ecosystem Conservation in Japan

The Economic Value of Ecosystem Conservation in Japan: Reduction of elicitation effect by Bid Effect Function Mitsuyasu YABE Kyushu University

Contents 1. 2. 3. 4. 5. Background and Purpose Analytical Model Survey Design and Explanatory Variables Estimation Results Conclusion

Background of the Study National Park Aso n Over 18 million people visit and enjoy the view of Aso grassland. n Many valuable flora and fauna were maintained by traditional human activities. n With decline of farmer and the change of farming pattern, the Aso grassland verge to crisis of maintaining

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

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Endangered Species in Aso Grassland Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

Photo by Miura

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Purpose of the Study Estimating the conservation value of Aso Glass Land n Improving the Contingent Valuation Method (CVM): Deceasing Elicitation Effects 1) Starting Point Effects 2) Yea-saying n

Elicitation Effects in CV Dichotomous choice CV is most commonly applied since respondents only need to select “accept” or “not accept” n However, even when the bid is higher than the latent willingness to pay, the respondents tend to “accept” the bid. n

Characteristics of the Model n 　 To decrease Elicitation Effects on the WTP →Introducing Bid Effect Function →Applying DC Approach for Five choice

Formulation of Bid Effects n Latent WTP for the i respondent: n The gap between the bid ti and latent WTP: n Bid effect function:

Stated WTP n n the stated WTP can be expressed: The probability that the stated WTP yi is larger than the bid ti :

The Hypothetical Question（1） n n n “suppose that grassland could be converted to forest and grassland could be lost as grazing and open burning are discontinued in Aso region. In order to prevent that happens, we set up the “Aso Grassland World Heritage Fund” to register and conserve the grassland The activity cost of “Aso Grassland World Heritage Fund” is supported by the public contribution.

The hypothetical question（2） If the fund costs (***) per household per annum, you may pay the amount of money? (Select only one) 　　1. will pay　> “YES” in Model 1 & 2 　 2. probably will pay > “YES” in Model 3 & 4 n 　 3. probably will not pay 　　4. will not pay 　 5. don’t know

The Log-likelihood Function in DC-CVM Where di 1 and di 2 are coded 1 when respondent chose the option and otherwise 0.

Form of Bid Effect Function n If bid effect function is liner function : n We have a relation as follows:

Bid Effect function based on logistic function n Hypotheses: n >>

Summary of Survey Questionnaire Survey Period： December 1998　　　　 n Respondents：Residents of Kumamoto Prefecture n Samples： 1000 n Samples used for Analysis： 418 n

Attributes of Survey Respondents n Average Age： 59 years old n Average Income：　5, 740, 000 yen per ann. (Approx. 52, 000 US$) Conservation Activities of Aso Glass land: 　 Highly Appreciated n

Explanatory Variables and Means Variables Description Mean S. E. INCOME Income (million yen） 5. 748 3. 422 LAGE Logarithm of age 4. 070 2. 773 BEAUTY Beauty of Aso grassland （ Log(1=not good, , 5=very good） 1. 556 0. 126 TRIP 1/0, 1=visit within 5 years 0. 765 4. 124 ACT 1/0, 1=conservation should be expanded 0. 394 0. 490 BEEF 1/0, 1=would buy meet of cows fed grass at more than 20 % higher price 0. 196 0. 397 POSSIBILITY 1/0, 1=possibility that grassland is conserved by fund is more than 70% 0. 539 0. 499

Comparison of Estimated Results Model 1 Model 2 Model 3 Model 4 Constant 0. 766 0. 512 5. 391** 5. 701*** INCOME 0. 044 0. 081* 0. 028 0. 037 LAGE 0. 812 1. 013* 0. 326 0. 107 BEAUTY 0. 739 0. 309 1. 136 1. 412** TRIP 0. 652* 0. 624** 0. 026 0. 258*** ACT 0. 833*** 0. 800*** 0. 636** 0. 646*** BEEF 1. 279*** 0. 747** 0. 806** 0. 922 POSSIBILITY 0. 662** 0. 652** 0. 022 -0. 058*** BID EFFECT 3. 683*** 3. 647*** ERROR 1. 682*** 0. 494*** 1. 079*** 0. 252*** Log Likelihood -148. 300 -145. 321 -96. 110 -94. 204

Comparison of Latent WTPs: Definitely Pay (Unite: Yen) Mean Model 1 Without Bid effect Func. 3, 904 Model 2 With Bid effect Func. 1, 028 95% CI 2, 055 to 8, 884 799 to 1, 374 Median 948 909 95% CI 714 to 1, 252 715 to 1, 163

Comparison of Latent WTPs: Probably Pay (Unite: Yen) Mean Model 3 Without Bid effect Func. 15, 875 Model 4 With Bid effect Func. 9, 633 95% CI 10, 144 to 27, 461 7, 274 to 12, 415 Median 95% CI 8, 871 9, 333 6, 867 to 11, 345 7, 096 to 12, 415

Results of Bid Effect Function Bid effect coefficient was statistically significant n The error term was reduced by more than 70% n Difference between Mean and Median was also reduced n

Conservation Value of Aso Grassland Estimated Value who definitely pay： Mean 1, 028 Yen ( = US$ 9. 3) n Return rate of this survey: 　41. 8% n Number of households of Kumamoto prefecture: 　594, 197 n Total Conservation Value per Year = 1, 028 x 0. 418 x 594197 　= 255 Million Yen/Year = US$ 2. 3 Million/Year　 n

Conclusion n Removal of influence from the bid effect bias enabled a more appropriate WTP estimation Price Oriented Attribute affected the WTP more than income The estimated total environmental value was more than the amount of the environmental gross investment at HTB

Thank you very much for your attention