Valuing the Recreational Benefits of Bore and Hellestø Beaches
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Valuing the Recreational Benefits of Bore and Hellestø Beaches By Anette Kleppe & Jannicke Jensen June 2018 FACULTY OF SOCIAL SCIENCES, UIS BUSINESS SCHOOL MASTER’S THESIS STUDY PROGRAM: THESIS IS WRITTEN IN THE FOLLOWING SPECIALIZATION/SUBJECT: Master of Business Administration Economic Analysis IS THE ASSIGNMENT CONFIDENTIAL? (NB! Use the red form for confidential theses) TITLE: Valuing the Recreational Benefits of Bore and Hellestø Beaches AUTHOR(S) SUPERVISOR: Gorm Kipperberg Candidate number: Name: 5024 Anette Kleppe ………………… ……………………………………. 5070 Jannicke Jensen ………………… ……………………………………. 2 Preface This paper constitutes 30 credits, and marks the end of our two-year education programme. It is a mandatory part of the MSc in Business Administration, which has been carried out at the University of Stavanger. This paper is written within the field of environmental valuation. The purpose of the research is to estimate the recreational value of two Norwegian beaches, and look at the effect of hypothetical scenarios in terms of a quality reduction. It has been a very educational, exciting and demanding process. Fortunately, we have received good help and support along the way. First of all, a special thanks to Gorm Kipperberg for good guidance and support. His engagement, ideas and support has been of great value during the process. We are also truly grateful for Jæren Friluftsråd and the County Governor of Rogaland who provided us with useful information about the Jæren beaches. Lastly, thanks to Ana Faria Lopes for good input and help, and to those who participated in the focus group that was held. 3 Abstract The main purpose of this study is to estimate the non-market value of Bore and Hellestø beaches in Norway, and the change in value under different hypothetical scenarios that might affect beach recreation. Information on the economic value of non-market goods, such as beaches, is necessary for optimal decision-making regarding coastal issues and policies that affect recreational value. Combining an individual travel cost model with contingent behaviour questions, this paper estimates the individual demand for recreation for two Norwegian beaches. Using a panel data approach, which compares both fixed effects and random effects models, we estimate the consumer surplus for status quo and for hypothetical quality changes. The consumer surplus estimates illustrate how the value of the beaches are negatively affected in the case of an environmental deterioration such as an oil spill or an activity restriction in the sand dunes. 4 Table of Contents 1. Introduction .......................................................................................................................... 8 2. Background Theory ............................................................................................................. 9 2.1 The Jæren Beaches ........................................................................................................... 9 2.1.1 Protected Landscape Area ....................................................................................... 10 2.1.2 Beach Erosion.......................................................................................................... 11 2.1.3 Oil Spills .................................................................................................................. 11 2.2 Literature Review ........................................................................................................... 12 3. Valuing the Environment .................................................................................................. 16 3.1 Environmental Values .................................................................................................... 16 3.2 Overview of Valuation Methods .................................................................................... 17 3.2.1 Revealed Preference Methods ................................................................................. 18 3.2.2 Stated Preference Methods ...................................................................................... 18 3.2.3 Combining Revealed and Stated Preference Methods ............................................ 19 4. Valuing Recreation ............................................................................................................. 20 4.1 Recreation Demand ........................................................................................................ 21 4.2 Welfare Measures ........................................................................................................... 23 4.3 The Travel Cost Method................................................................................................. 25 4.4 Common Biases and Shortcomings with the TCM ........................................................ 26 4.4.1 The Cost of Time ..................................................................................................... 26 4.4.2 The Role of Substitute Sites .................................................................................... 27 4.4.3 Multiple Purpose Trips ............................................................................................ 28 5. Data ...................................................................................................................................... 29 5.1 Survey Design ................................................................................................................ 29 5.2 The Questionnaire .......................................................................................................... 30 5.2.1 The Revealed Preference Section ............................................................................ 30 5.2.2 The Stated Preference Section ................................................................................. 30 5.2.3 The Demographic Section ....................................................................................... 32 5.3 Data Collection ............................................................................................................... 32 5.4 Data Processing .............................................................................................................. 33 5.4.1 Correcting for Missing Values ................................................................................ 33 5.4.2 Calculating Total Travel Cost ................................................................................. 33 6. Descriptive Statistics .......................................................................................................... 35 7. Econometric Models ........................................................................................................... 41 7.1 Poisson............................................................................................................................ 41 7.2 Negative Binomial .......................................................................................................... 42 5 7.3 Panel Data....................................................................................................................... 43 7.4 Correcting for On-Site Sampling ................................................................................... 43 7.4.1 Endogenous Stratification ....................................................................................... 44 7.4.2 Truncation ............................................................................................................... 44 7.4.3 Methods of Correction............................................................................................. 44 8. Model Application .............................................................................................................. 45 8.1 Model Specification ....................................................................................................... 45 8.2 Hypothesis Specification ................................................................................................ 48 9. Estimation Results .............................................................................................................. 48 9.1 Regression Results ......................................................................................................... 49 9.2 CS Estimates................................................................................................................... 52 9.3 Economic Impact of Scenarios ....................................................................................... 53 10. Discussion .......................................................................................................................... 55 10.1 Limitations.................................................................................................................... 57 10.2 Implications for Future Work ....................................................................................... 58 11. Conclusion ......................................................................................................................... 59 12. References ......................................................................................................................... 61 Appendix 1: Literature review .............................................................................................. 72 Appendix 2: Questionnaire .................................................................................................... 83 Appendix 3: Tables ................................................................................................................