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Dissertation Quantifying the Economic DISSERTATION QUANTIFYING THE ECONOMIC HEALTH COST OF EXPOSURE TO WILDFIRE SMOKE: FOUR ESSAYS IN NON-MARKET VALUATION, METHODOLOGICAL COMAPARISONS, AND ECONOMETRIC METHODS TO ADDRESS ENDOGENEITY Submitted by Leslie A. Richardson Department of Agricultural and Resource Economics In partial fulfillment of the requirements For the Degree of Doctor of Philosophy Colorado State University Fort Collins, Colorado Spring 2011 Doctoral Committee: Advisor: John Loomis Patricia Champ Andy Seidl Robert Kling ABSTRACT QUANTIFYING THE ECONOMIC HEALTH COST OF EXPOSURE TO WILDFIRE SMOKE: FOUR ESSAYS IN NON-MARKET VALUATION, METHODOLOGICAL COMAPARISONS, AND ECONOMETRIC METHODS TO ADDRESS ENDOGENEITY Wildfires and their proximity to urban areas have become more frequent, yet few economic studies have looked closely at the welfare implications exposure to wildfire smoke has on affected individuals. Further, there is a growing concern that human health impacts resulting from this exposure are ignored in estimates of the monetized damages from a given wildfire. Current research highlights the need for better data collection and analysis of these impacts. Using unique primary data, this dissertation quantifies the economic health cost of exposure to wildfire smoke using non-market valuation techniques including the contingent valuation and defensive behavior methods. The individual willingness to pay for a reduction in symptom days as well as perceived pollution levels are quantified and compared to a simple cost of illness estimate. Results indicate that many residents surveyed did not seek medical attention for major health effects, but rather suffered from minor health impacts whose cost is not captured in a cost of illness estimate. As a result, ii expenditures on defensive activities and the disutility associated with symptoms and lost leisure are found to be substantial for the case of wildfire smoke exposure. iii ACKNOWLEDGEMENTS I would like to express my sincere gratitude to my graduate advisor John Loomis, who, for the past four years, has provided me with opportunities in this fascinating field of environmental economics that I never imagined I would have. He has been an incredible mentor and I have greatly valued my time spent as his research assistant. I would like to thank Patty Champ for giving me the opportunity to work at the Rocky Mountain Research Station on this project. Our intriguing conversations about life as well as her gifts of delicious baked goods undoubtedly helped me along the way. It has been an absolute honor to work with John and Patty, both of whom provided me with the confidence, knowledge and opportunity to successfully complete my PhD. Thanks to my other committee members, Andy Seidl and Robert Kling, for providing valuable comments to assist me in improving upon my work. Thanks also to Sarah Powell and Jim McTernan at CSU for their help in getting my survey out on a tight deadline, as well as Pam Froemke at the Rocky Mountain Research Station for making data entry an enjoyable process. I would also like to thank Mark Dickie, Mike Lacy, Partha Deb and Rainer Winkelmann, all of whom I have never met, but whose responses to my e-mail questions helped me more than they know. Finally, a warm thanks to my loving and supportive friends and family, especially Chris, Charlotte, Kira, Debbie and Miranda, as well as my parents and sister back in Maryland. iv Funding for this research was provided by the USDA Forest Service and Colorado State University. Any errors or oversights in this dissertation are, of course, my own. v TABLE OF CONTENTS CHAPTER ONE: Introduction ............................................................................................... 1 CHAPTER TWO: The Hidden Cost of Wildfires: Health Effects and Associated Costs from California’s Station Fire of 2009 ........................................................................ 8 INTRODUCTION ..................................................................................................................... 8 METHODS FOR QUANTIFYING THE ECONOMIC COST OF HEALTH DAMAGES .............................................................................................................................. 11 Defensive Behavior Method ............................................................................................... 14 THE STATION FIRE ............................................................................................................. 17 Study Area ........................................................................................................................... 17 Data Collection ................................................................................................................... 18 Pollution Levels ................................................................................................................... 23 Health Effects ....................................................................................................................... 26 Averting and Mitigating Actions ....................................................................................... 27 MAXIMUM LIKELIHOOD ESTIMATION OF A HEALTH PRODUCTION FUNCTION ............................................................................................................................. 30 RESULTS ................................................................................................................................. 33 Determinants of Expected Symptom Days ...................................................................... 35 Determinants of Air Cleaner Use ...................................................................................... 36 WTP for a Reduction in One Wildfire Smoke Induced Symptom Day ......................... 37 Cost of Illness ...................................................................................................................... 38 IMPLICATIONS ..................................................................................................................... 40 APPENDIX .............................................................................................................................. 44 REFERENCES ........................................................................................................................ 46 CHAPTER THREE: A Comparison of Defensive Expenditures and Willingness to Pay for Wildfire Smoke Reduction: How Different are These Two Methods? .......... 51 INTRODUCTION ................................................................................................................... 51 THEORETICAL FRAMEWORK ........................................................................................ 54 EMPIRICAL APPLICATION: WILDFIRE SMOKE FROM THE STATION FIRE .......................................................................................................................................... 58 ESTIMATING THE COST OF ILLNESS AND AVERTING EXPENDITURES ................................................................................................................... 58 Econometric Models ........................................................................................................... 58 Results: Regression Models ............................................................................................... 60 Results: Cost of Illness and Averting Expenditures ........................................................ 67 vi ESTIMATING THE WTP FOR A REDUCTION IN PERCEIVED POLLUTION LEVELS ................................................................................................................................... 69 Econometric Model ............................................................................................................. 69 Results: Regression Model ................................................................................................. 70 Results: Willingness to Pay ................................................................................................ 72 COMPARISON OF PREDICTED COST OF ILLNESS AND AVERTING EXPENDITURES WITH WILLINGNESS TO PAY ........................................................ 73 CONCLUSIONS ..................................................................................................................... 74 REFERENCES ........................................................................................................................ 77 CHAPTER FOUR: Valuing Morbidity from Wildfire Smoke Exposure: A Methodological Comparison of Revealed and Stated Preference Techniques ........... 80 INTRODUCTION ................................................................................................................... 80 LITERATURE REVIEW ....................................................................................................... 84 THEORETICAL FRAMEWORK ........................................................................................ 86 Defensive Behavior Method ............................................................................................... 86 Contingent Valuation Method ........................................................................................... 88 Cost of Illness Approach .................................................................................................... 89 Hypothesis ............................................................................................................................ 90 SAMPLING FRAME AND DATA COLLECTION
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