Measuring the Economic Benefits of Water Quality Improvement with Benefit Transfer: An Introduction for Noneconomists
Christopher F. Dumas, Peter W. Schuhmann, and John C. Whitehead
Abstract.—In this paper, we provide an introduction to water quality benefit estimation for noneconomists. Net water quality benefits are typically measured using the concept of consumer surplus, which is estimated using a number of economic valuation methodologies. These are divided into direct and indirect methods. Direct methods involve questioning survey respondents to determine their consumer surplus. Indirect methods use data from consumer market behavior to estimate economic values. When limited time or funding preclude costly data collection and the development of new consumer surplus estimates, the method of benefit transfer is used to tailor preexisting consumer surplus estimates to fit new policy situations. We provide an example of benefit transfer by estimating the value of water quality improvements for the Cape Fear River in North Carolina. Benefit transfer methods are used with three valuation approaches to estimate the benefits of water quality improvement.