Mikolaj Czajkowski

Benefits of meeting nutrient reduction targets for the Baltic Sea - a contingent valuation study in the nine coastal states

This paper presents the results of an internationally coordinated contingent valuation study on the benefits of reducing marine eutrophication in the Baltic Sea according to current policy targets. With over 10,500 respondents from the nine coastal states around the sea, we examine public willingness to pay (WTP) for reduced eutrophication and its determinants. There are considerable differences in mean WTP between countries, with Swedes being willing to pay the most and Latvians the least. The aggregate annual WTP is approximately €3600 million. In addition, we find that countries are heterogeneous in terms of the effects of income, attitudes and familiarity on WTP. Income elasticities of WTP are below 1 for all countries, ranging between 0.1 and 0.5. Attitudes and personal experience of eutrophication are important determinants of WTP, but the specific effects differ between countries. The findings can be used in economic analyses for the European Union (EU) Marine Strategy Framework Directive and to justify additional eutrophication reduction measures in the Baltic Sea.

Learning and Fatigue Effects Revisited: Investigating the Effects of Accounting for Unobservable Preference and Scale Heterogeneity

Using multiple choice tasks per respondent in discrete choice experiment studies increases the amount of available information. However, respondents’ learning and fatigue may lead to changes in observed utility function preference (taste) parameters, as well as the variance in its error term (scale); they need to be controlled to avoid potential bias. A sizable body of empirical research offers mixed evidence in terms of whether these ordering effects are observed. We point to a significant component in explaining these differences; we show how accounting for unobservable preference and scale heterogeneity can influence the magnitude of observed ordering effects. (JEL Q23, Q51)

The Effects of Experience on Preferences: Theory and Empirics for Environmental Public Goods

This article develops a choice model for environmental public goods, which allows for consumers to learn about their preferences through consumption experiences. We develop a theoretical model of Bayesian updating, perform comparative statics over the model, and show how the theoretical model can be consistently incorporated into a reduced form econometric model. Our main findings are that in a random utility model (RUM) discrete choice model, a subjects scale should increase and the variability of scale should decrease with experience if subjects are Bayesians. We then estimate the model using field data regarding preferences for one particular public good, water quality. We find strong evidence that additional experience increases scale, thereby making consumer preferences more predictable from the econometricians perspective. We find supportive but less convincing evidence that experience decreases the variability of scale across subjects.

Valuing the commons: An international study on the recreational benefits of the Baltic Sea

The Baltic Sea provides benefits to all of the nine nations along its coastline, with some 85 million people living within the catchment area. Achieving improvements in water quality requires international cooperation. The likelihood of effective cooperation is known to depend on the distribution across countries of the benefits and costs of actions needed to improve water quality. In this paper, we estimate the benefits associated with recreational use of the Baltic Sea in current environmental conditions using a travel cost approach, based on data from a large, standardized survey of households in each of the 9 Baltic Sea states. Both the probability of engaging in recreation (participation) and the number of visits people make are modeled. A large variation in the number of trips and the extent of participation is found, along with large differences in current annual economic benefits from Baltic Sea recreation. The total annual recreation benefits are close to 15 billion EUR. Under a water quality improvement scenario, the proportional increases in benefits range from 7 to 18% of the current annual benefits across countries. Depending on how the costs of actions are distributed, this could imply difficulties in achieving more international cooperation to achieve such improvements.

Municipal wastewater treatment in Poland – efficiency, costs and returns to scale

This paper reports the costs of municipal wastewater collection and treatment in Poland. Our study provides detailed cost estimates for the collection and treatment of municipal wastewater, based on an empirical sample of 1,400 operators, who jointly collect and treat over 80% of wastewater in Poland. The unit costs of collection and treatment, and the nitrogen and phosphorus treatment efficiency were investigated, and the effects of plant capacity on unit costs (scale effects) were explored. Primary, secondary and tertiary treatment cost functions were analysed econometrically using the Box-Cox regression model, indicating high non-linearity and significant scale effects. We found that wastewater treatment costs were increasing with technology efficiency (moving from the primary, through the secondary, to the tertiary treatment), and decreasing with higher wastewater treatment plant capacity. Our results provide a comprehensive picture of municipal wastewater treatment in Poland but potentially, as the technology is fairly generic, they can also be used for applications in other countries, after accounting for capital and labour cost differences. The paper thus provides a valuable input into cost-benefit analyses of nutrient loading reduction achieved by extending or intensifying municipal wastewater treatment.

Use and Non-Use Values in an Applied Bioeconomic Model of Fisheries and Habitat Connections

ABSTRACT In addition to indirect support to fisheries, marine habitats also provide non-use benefits often overlooked in most bioeconomic models.We expand a dynamic bioeconomic fisheries model where presence of natural habitats reduces fishing cost via aggregation effects and provides non-use benefits. The theoretical model is illustrated with an application to cold-water corals in Norway where two fishing methods are considered—destructive bottom trawl and non-destructive coastal gear. Non-use values of cold-water corals in Norway are estimated using a discrete choice experiment. Both the theoretical model and its empirical applications demonstrate how non-use values impact optimal fishing practices. JEL Codes: Q22, Q28, Q57.

Valuing the benefits of improved marine environmental quality under multiple stressors

Many marine ecosystems are under increasing pressure from multiple stressors. In the Baltic Sea, these stressors include oil and chemical spills from shipping, nutrient run-off from land and the introduction of non-indigenous species. All of these pressures have been growing over recent years. Increasing pressures lead to reductions in environmental quality, which produce negative effects on human well-being. In this paper, the choice experiment method is used to estimate the benefits to people in Estonia resulting from reductions in pressure from multiple stressors in the Baltic Sea. The main results show that, firstly, respondents have a positive, statistically-significant willingness to pay to reduce each of the three stressors analysed. Secondly, the average willingness to pay for the improvement in the quality of all Estonian marine waters to achieve Good Environmental Status is around 65 euro per household per year, with a 95% confidence interval of 48-77 euro. Thirdly, the greatest share of value of this total economic benefit is derived from the willingness to pay for reductions in the risk of large scale oil and chemical spills.

Re-examining empirical evidence on stated preferences: importance of incentive compatibility

ABSTRACT The stated preference (SP) methods use respondents’ stated choices made in hypothetical situations to infer their preferences for environmental and other public goods. These methods enable researchers to express the general publics preferences in monetary terms, and hence, to estimate the economic value of a change in the quantity or quality of the goods. However, a key question remains regarding SP methods’ validity: do the value estimates obtained from an SP study reflect respondents’ true preferences? Numerous empirical investigations have tested SP methods’ validity, but overall conclusions are mixed. We critically re-evaluate this evidence considering the issue of the necessary conditions for incentive compatibility of SP surveys. Our analysis shows that once theory-based conditions for incentive compatibility are taken into account, the available studies consistently show that the SP methods provide valid estimates of actual preferences. As a result, we argue that SP surveys must be made incentive compatible in order to observe consumers’ true preferences.

The Baltic Sea as a time machine for the future coastal ocean

Science-based, multinational management of the Baltic Sea offers lessons on amelioration of highly disturbed marine ecosystems. Coastal global oceans are expected to undergo drastic changes driven by climate change and increasing anthropogenic pressures in coming decades. Predicting specific future conditions and assessing the best management strategies to maintain ecosystem integrity and sustainable resource use are difficult, because of multiple interacting pressures, uncertain projections, and a lack of test cases for management. We argue that the Baltic Sea can serve as a time machine to study consequences and mitigation of future coastal perturbations, due to its unique combination of an early history of multistressor disturbance and ecosystem deterioration and early implementation of cross-border environmental management to address these problems. The Baltic Sea also stands out in providing a strong scientific foundation and accessibility to long-term data series that provide a unique opportunity to assess the efficacy of management actions to address the breakdown of ecosystem functions. Trend reversals such as the return of top predators, recovering fish stocks, and reduced input of nutrient and harmful substances could be achieved only by implementing an international, cooperative governance structure transcending its complex multistate policy setting, with integrated management of watershed and sea. The Baltic Sea also demonstrates how rapidly progressing global pressures, particularly warming of Baltic waters and the surrounding catchment area, can offset the efficacy of current management approaches. This situation calls for management that is (i) conservative to provide a buffer against regionally unmanageable global perturbations, (ii) adaptive to react to new management challenges, and, ultimately, (iii) multisectorial and integrative to address conflicts associated with economic trade-offs.

Designing a socially efficient cultural policy: the case of municipal theaters in Warsaw

Abstract While public support for culture has become a less self-evident privilege than in the past, the economic evidence for benefits a society gains from these goods has become essential for both cultural economics and cultural policy. The aim of our study is to investigate socially preferred ways of allocating scarce public resources among municipal theaters in Warsaw. The problem investigated is a current issue for local policy-making, but in a broader sense, it illustrates how state-of-the-art stated preference methods can be employed to support cultural policy. We find that inhabitants of Warsaw assign a positive value to the broader accessibility of the theaters, and their willingness to pay for making them a truly public good (by introducing a program of highly discounted tickets) exceeds the costs of such a policy. However, we also find that the cost-benefit relationship varies across theaters with different types of plays in their repertories. Our results imply a different level of socially efficient support for experimental, drama, children’s and entertainment theaters.