Economic Value of Water Quality Improvements in Ontario
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This study estimates the economic value of lake water quality changes in South Eastern region of Ontario using the hedonic price method. The research combines 58,085 house transaction data between 2005-2014 time periods and water quality (WQ) data from 494 unique lakes. I examine the effect of total phosphorus and Secchi depth (SD) on house price using a log-linear regression. Considering SD as the variable of interest, results indicate that house buyers are willing to pay a 1.9% higher price for a one-meter improvement in SD if the house is located close to the lake WQ station. The marginal willingness to pay (MWTP) for SD reaches the peak, $7,627 per meter, for houses located within 500 meters to 750 meters distance to the lake stations. However, the price premium starts to decrease as the lake distance increases; house buyers are willing to pay 4.4% less for a marginal increase in SD if the house is located within 2,000 to 3,000 meters of the WQ stations. I assess the robustness of the results across the alternative data specification and estimate the highest level of MWTP for water quality ($6, 142) considering houses within 3 kilometres to the lake stations. The estimated local benefits can inform the design of WQ improvement programs.
DegreeMaster of Science (M.Sc.)
DepartmentAgricultural and Resource Economics
CommitteeBelcher, Kenneth; Skolrud, Tristan; Vyn, Richard
Copyright DateJanuary 2021
Water quality improvements