Modeling Linkages Between Land Development And Water Quality in Freshwater Lakes

2021 Fiscal Year Final Research Report

• Project/Area Number: 20K22091
• Research Category: Grant-in-Aid for Research Activity Start-up
• Allocation Type: Multi-year Fund
• Review Section: 0107:Economics, business administration, and related fields
• Research Institution: Kobe University
• Principal Investigator: Wolf David 神戸大学, 経済学研究科, 講師 (60878271)
• Project Period (FY): 2020-09-11 – 2022-03-31
• Keywords: Housing Price / Hedonic / Apartment Rentals / Flood Risk / Water Quality

Outline of Final Research Achievements

I make two advancements which helps us to better understand how people value changes in public goods. I first implement a new econometric method that allows for the recovery of demand functions of public goods, which are better suited for non-marginal welfare analysis relative to MWTP. Using water quality as an application, I find traditional MWTP estimates undercount the benefits from water quality improvement by at least 22% or $1,500 per household in comparison to the benefits derived from a demand function.In subsequent research, I examine a new topic by looking at how downstream rental prices in Fukuoka, Japan responded to the completion of an upstream dam. I find apartment prices rose by 1.8% if they were protected by the recently completed Gokayama Dam. This premium is only observed after a natural disaster hit western Japan in 2018, causing residents to update their perceptions of flood risk.

Free Research Field

Environmental Economics

Academic Significance and Societal Importance of the Research Achievements

Policy interventions often have non-marginal goals in mind. Current methods to value these changes are, however, typically ill-suited for non-marginal analysis. I overcome this problem by developing a method to recover demand curves for public goods, which are valid even for non-marginal analysis.