Valuing Ecosystem Services Toward Better Environmental Decision-Making (2005) / Chapter Skim
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Appendix B: Household Production Function Models
Appendix B: Household Production Function Models
Pages 266-269
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From page 266... ...
approaches involve some form of modeling of household behavior, based on the assumption of either a substitute or a complementary relationship between the environmental good or service and one or more marketed commodities consumed by the household. Examples of these models include allocation of time models for recreation or other activities involving household labor allocation, averting behavior models that account for the health and welfare impacts of pollution, and hedonic price models that account for the impacts of environmental quality on choice of housing.
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From page 267... ...
Finally, one assumes that the household has an income based on wage earnings and uses that income to purchase all of its expenditures, including money spent on traveling to and from the lake. Given market prices px and pv for commodities x and v, respectively, and representing the market wage rate earned by the household as w, the household's budget constraint is expressed as px x + pvv = w L - lu - l + M , ( )
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From page 268... ...
Changes in environmental quality of the lake would therefore cause this demand curve to "shift," and the welfare consequences, or value, of this change in environmental quality would be measured by changes in consumer surplus from this shift in the demand for fishing visits. AVERTING BEHAVIOR MODEL Instead of z being a desirable commodity such as recreational visits, it could alternatively be "bad," such as the incidence of waterborne disease from use of a microbially polluted aquatic system as a source of domestic water supply.
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From page 269... ...
for x and z, respectively; totally differentiating with respect to P and q; and rearranging yield the following condition for optimal choice of any ecological service q that affects the value of the residential property: px U zqz dP .
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