Application of Nested Logitech Model for Ecosystem Services Valuation (Case study: Gavkhony Wetland, Isfahan Province, Iran)

Authors
S. P. Jalili Kamju 1
R. Khoshakhlagh 2
Y. Shirinkhah 3
S. Samadi 4
G. H. Kiani 5
1 Assistant Professor in Economics, Humane Sciences Faculty, University of Ayatollah Borujerdi (R.A), Borujerd, Iran
2 Professor in Economics, Administrative and Economics Faculty, University of Isfahan, Isfahan, Iran
3 M.A. in Management, Management Faculty, Islamic Azad University, Kish International Branch, Kish, Iran
4 Associate Professor in Economics, Administrative and Economics Faculty, University of Isfahan, Isfahan, Iran
5 Assistant Professor in Economics, Administrative and Economics Faculty, University of Isfahan, Isfahan, Iran
Abstract
Wetlands as a situ for the growth of native plants, as a habitat for certain species of fish and aquatic birds, and because of their potential economic, cultural and recreational services, are valuable heritage so their protection and conservation is very essential. Mostly due to the absence of wetlands services’ valuation, lack of special regulations, and lack of guarantee for these properties, resources and services of wetlands are not utilized appropriately, and destructed and evacuated in a free and unrestricted fashion, leading to inefficiency in use. The purpose of this study is the economic valuation of Gavkhony wetland ecosystem attributes, estimation of implicit price for attributes, impact assessment of socio-economic variables such as age, marriage, indigenous, family size and education on willingness to pay (WTP), and analyzing welfare and compensation variation due to variation of hypothetical policy. The approach being used is choice experiment that is a subset of choice modeling procedure and stated preference method. Data were collected from six different choice experiments provided in the questionnaires, which were filled out by 500 randomly selected households in Isfahan and Varzaneh cities in the spring and summer of 2013. Each questionnaire contained 72 hypothetical policies, 36 choice sets, 2442 observations and 7327 rows of data. Nested Logitech models and Hausman-MacFadden test were used in order to estimate the visitors’ WTP for improving attribute levels for Gavkhony wetland. This procedure was used on the basis of multinomial discrete choice analysis of preferences, Lancaster’s theory of value and the theory of random utility function. The Hausman-MacFadden test results showed that cross-elasticity between the first and third options was the same. Thus, these two options were placed in the second nest. The results further showed that the visitors had WTP for preserving forest diversity and vegetation of wetlands and its surrounding; preserve of natural habitats and organisms life of wetland (bird, fish and animals); wetland hygiene (preventing industrial and domestic effluent, and water salinity); and increasing the water surface (increasing wetland water inlet). The values estimated for these four aspects correspondingly were 8636, 12584, 11553 and 4740 Rials. Some socio-economic variables such as gender, marriage, age, family expenditure, education and being native had a positive impact on the visitors’ WTP. The surplus welfareresults showed that in 72 hypothetical policies, option 1 had the most positive welfare, and option 5 had the most negative welfare for the users of Govkhony wetland. The surplus welfare results based on WTP estimation provide important tools for policy making.
Keywords
Lancaster Theory
Multinomial Discrete Choice Analysis
Choice Modeling
Hausman-MacFadden Test
Abebe, T., Seyoumb, A. and Feyssac, D.H. Benefits of wetland conservation interventions to local households in southwestern Ethiopia: Empirical evidence from attributes-based valuation, J. Environ. Sci. Water Resources, 2014; 3(3): 60-68.
Amemiya, T. Advanced econometrics. Cambridge, MA: Harvard University Press. 1985; 427P.
Barbier, E.B., Acreman, M. and Knowler, D. Economic valuation of wetlands, Ramsar Convention Bureau, Gland, Switzerland. 1977; 166P.
Bateman, I.J., Lovett, A.A. and Brainard, J.S. Applied environmental economics: a GIS approach to Cost-Benefit Analysis. Cambridge University Press, Cambridge. 2003; 216-269.
Bennett, J. and Blamey, R. The Choice Modeling Approach to Environmental Valuation, New horizons in environmental valuation.  Edward Elgar publishing limited, UK. 2001; 803-824.
Bockstael, N.E. Modeling economics and ecology: the importance of a spatial perspective, Am. J. Agr. Econ., 1996; 78: 1168-1180.
Boxall, P.C., W.L. Adamowicz, J. Swait, M. Williams and J. Louviere. A comparison of stated preference methods for environmental valuation. Ecol. Econ., Working paper, 1996; 18: 243-253.
De Groot, R.S., Stuip, M.A.M., Finlayson, C.M. and Davidson, N. Valuing wetlands: Guidance for valuing the benefits derived from wetland ecosystem services, Ramsar Technical Report No. 3/CBD Technical Series No. 27. Ramsar Convention Secretariat, Gland, Switzerland and Secretariat of the Convention on Biological Diversity, Montreal, Canada. 2006; 253-260.
Fattahi B. and Ildoromi, A.R. Effect of Some Environmental Factors on Plant Species Diversity in the Mountainous Grasslands (Case Study: Hamedan - Iran), Int. J. Nat. Resour. Marine Sci., 2011; 1(1): 45-52.
Fleuret, A. and Poirier, J. Using the choice experiment method for valuing improvements in water quality: A simultaneous application to four recreation sites of a river basin, Paper presented at 59th Conference of Association Française de Science Economique, 9-10 September 2010, Nanterre Université. 2010; 19P.
Greene, W.H. Econometric Analysis. 7th ed. Upper Saddle River, NJ: Prentice Hall. 2012; 1070P.
Hanemann, W.M. Valuing the Environment through Contingent Valuation." J. Econ. Perspect., 1994; 8: 19-44.
Hanley, N., Mourato, S. and Wright, R. Choice modelling approaches: A superior alternative for environmental valuation? J. Econ. Surv., 2001; 15(3): 435-462.
Hanley, N., Wright, R.E. and Adamowicz, W. Using Choice Experiments to Value The Environment: Design Issues, Current Experience and Future Prospects. Environ. Resour. Econ., 1998; 11: 413-428.
Hanley, N., Wright, R.E. and Alvarez, F.B. Estimating the economic value of improvements in river ecology using choice experiment: An application, J. Environ. Manage., 2006; 78: 183-193.
Hausman, J.A. and MacFadden, D.L. Specification tests for the multinomial logit model. J. Econometrica, 1984; 52: 1219-1240.
Hensher, D.A., Rose, J.M. and Greene, W.H. Applied Choice Analysis: A Primer. New York: Cambridge University Press. 2005; 1216P.
Hollis, G.E., Adams, W.M. and Aminu-Kano, M. (eds.). Environment, Economy and Sustainable Development of a Sahelian Floodplain Wetland. IUCN, Gland, Switzerland. 1993; 242P.
Holmes, T.P. and Boyle, K.J. Dynamic Learning and Context-dependence in Sequential, Attribute-based, Stated preference Valuation Questions. J. Land Econ., 2005; 81 (1): 114-126.
Horne, P. Forest Owners’ Acceptance of Incentive Based Policy Instruments in Forest Biodiversity Conservation – A Choice Experiment Based Approach. Silva Fenn., 2006; 40: 169-178.
Jalili kamjo, S.P., Sharzie, GH. A., khoshakhlaq, R. and Rahimi, T. Application of Nested Logit Model in Ecosystem Services Valuation (case study: Ganjname Recreational site), J. Nat. Recour., 2014; 253-265. (In Persian)
Lambert, A. Economic Valuation of Wetlands: an Important Component of Wetland Management Strategies at the River Basin Scale, a discussion paper. 2003; 1-23.
Lancaster, K. A New Approach to Consumer Theory’, J. Polit. Econ., 1996; 74: 132-157.
Luce, R.D. Individual Choice Behavior: A Theoretical Analysis. New York: Wiley. 1959; 679P.
Manski, C. The Structure of Random Utility Models, Theory and Decision, J. Environ. Manage., 1977; 8: 229-254.  
McFadden, D.L. Quantitative methods for analyzing travel behavior of individuals: Some recent developments. Working paper 474, Cowles Foundation. http://cowles.econ.yale.edu/P/cd/d04b/d0474.pdf. 1977; 1-27.
Meyerhoff, J., Liebe, U. and Hartje, V., Benefits of biodiversity enhancement of nature-oriented silviculture: Evidence from two choice experiments in Germany, J. Forest Econ., 2008; 15: 37-58.
Mitsch, W.J. and Gosselink, J.G. Wetlands. Van Nostrand Reinhold, New York.  2nd Edition. 1993; 743P.
Mogas, J., Riera, P. and Bennett, J. Accounting for Afforestation Externalities: A Comparison of Contingent Valuation and Choice Modelling. Eur. Environ., 2005; 15: 44-58.
Munizaga, M.A. and Ortúzar, J. de DCorrelación entre alternativas: el modelo Logit Jerárquico enprofundidad.  Actas del IX Congreso Chileno de Ingeniería de Transporte, Sociedad Chilena deIngeniería de Transporte, Santiago. 1999 a; 109-120.
Munizaga, M.A. and Ortúzar, J. de D. Nested logit modelling: Some hard facts. 27th European Transport Conference, Vol. P324. PTRC Education and Research Services Ltd., Londres. 1999 b; 25-36.
Ortúzar, J. de D. and Willumsen, L.G. Modelling Transport. Segunda Edición, John Wiley and Sons, Chichester. 1994; 606P.
Parvari, S.H., Pahlavanravi, A., MoghaddamNia, A. R., Dehvari, A. and Parvari, D. Application of Methodology for Mapping Environmentally Sensitive Areas (ESAs) to Desertification in Dry Bed of Hamoun Wetland (Iran), Int. J. Nat. Resour. Marine Sci., J. ECOPERSIA, 2011; 1 (1): 65-80.
Sakizadeh, M. Performance of Classification Methods to Evaluate Groundwater, (Case Study: Shoosh Aquifer), J. ECOPERSIA, 2014; 2(2): 597-612.
Sharzie, GH.A. and Jalili Kamjo, S.P. Choice modeling: A new approach to valuation of environmental goods Case study: Hamadan Recreational and historical site, J. Econ. Res., 2013; 13(3): 1-18. (In Persian)
Thurstone, L. A Law of Comparative Judgment, Psychological Review, 1927; 4: 273-286.
Viet Khai, H. and Yabe, M. Choice modeling: Assessing the non-market environmental values of the biodiversity conservation of swamp forest in Vietnam, J. Engineering, 2014; 5-77.
Xu, W., Lippke, B.R. and Perez-Garcia, J. valuing biodiversity, aesthetics, and Job Losses Associated with Ecosystem Management Using Stated Preferences. J. Forest Sci., 2003; 49: 247-257.
ECOPERSIA
Volume 4, Issue 1 - Serial Number 15
March 2016
Pages 1251-1267