Measuring benefits of providing water for environmental improvement in Daechi-stream and Ji-stream

Abstract

This study attempts to estimate the benefits of using water ensuing from the Chilgap multipurpose reservoir for environmental improvement. The contingent valuation method (CVM) was used to elicit the willingness to pay (WTP) for providing environmental improvement water from the Chilgap reservoir to Daechi-stream and Ji-stream. The DCDB (double-bound dichotomous choice) survey method was used to collect data for the analysis. Due to the usually high cost of increasing the sample size, the use of follow-up questions was implemented as an inexpensive method of improving the efficiency of the estimation. A spike model was used in this study because a number of respondents showed zero WTP. The spike model can be estimated as easily as the conventional model. Results show that the average annual household’s WTP is 4,516 won using the conventional model and 8,644 won using the spike model. Applying the estimated average annual household’s WTP to the Chungnam and Daejeon regional levels, the benefits of environmental improvement water from the Chilgap reservoir is estimated at 11.9 billion won per year. The temporal benefits of providing water for environmental improvement, for a 50-year period at a 6.0% discount rate, is estimated at about 190 billion won in the Chungnam and Daejeon areas. These results could be useful especially when the government tries to determine an appropriate level of investment and to make a policy related to providing environmental improvement water.