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Valuing environmental health risks: A comparison of stated preference techniques applied to groundwater contamination

Tammy Barlow McDonald, University of Massachusetts Amherst

Abstract

This research examines groundwater protection programs as a case study of investments to address long-term environmental health risks. The value individuals place on reducing their risk of exposure to chemical contaminants is estimated using stated preference methodology, accounting for the discounting of benefits that occur in future years. A combined contingent valuation/conjoint analysis survey was mailed to Western Massachusetts residents who use a private well for their drinking water. A modified form of the contingent valuation format was included to obtain a conservative, lower-bound estimate of willingness-to-pay. ^ The individual's rate of time preference is elicited in two contexts: preferences for programs that save lives from an unspecified threat now and in the future, and groundwater protection programs that offer risk reductions this year and in ten years. The results have favorable implications for the benefit-cost analysis of programs that address long-term environmental health risks. The individual's rate of discount for general life-saving programs falls as the time horizon increases. The estimated mean implicit discount rates for the ten, twenty-five and fifty year time horizons are 10.35%, 2.9%, and 3.82%, respectively. The estimated mean rates for the ten and twenty-five year time horizons are significantly different from each other, allowing rejection of constant exponential discounting. However, the individual's rate of discount may be context-specific. In the context of groundwater protection benefits, individuals appear to place equal weight on risk reductions this year and risk reduction ten years from now. These findings suggest that the individual's rate of discount for certain types of health risks may be very low or zero; individuals may not be as myopic as previously thought when faced with intertemporal choice decisions involving health benefits. ^ Estimates of willingness-to-pay for groundwater protection are highly sensitive to the stated preference technique used; median willingness-to-pay estimates range from a one-time cost per household of −$1951.48 to $2063.62. The results of this study suggest that traditional conjoint models may overestimate willingness-to-pay. Finally, this study also finds evidence of significant non-use value for groundwater protection; individuals are willing to pay a premium to reduce the risk of all Massachusetts residents. ^

Subject Area

Economics|Agricultural economics

Recommended Citation

McDonald, Tammy Barlow, "Valuing environmental health risks: A comparison of stated preference techniques applied to groundwater contamination" (2001). Doctoral Dissertations Available from Proquest. AAI3012165.
http://scholarworks.umass.edu/dissertations/AAI3012165

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