The Value of Improved Water Quality A Random Utility Model of Recreation in the Stockholm Archipelago

This paper examines how an improved water quality affects the demand for recreation in the Stockholm archipelago. Accomplishing the improvement by reducing nutrient emissions is costly, and is economically motivated only if benefits are great enough to cause a social gain. It is thus of great importance to estimate the benefits from improved water quality. In the present study, water quality is measured as sight depth, a variable scientifically linked to nutrient concentration and behaviourally linked to recreational demand. A random utility model – the conditional logit model – is applied to estimate the benefits from reduced nutrient concentrations. Using sight depth data and data from large-scale questionnaire surveys on travel behaviour, visits in the archipelago are regressed on travel cost, mean sight depth and communication by ferry. The results are used in a policy experiment where the consumer surplus from a hypothetical 1-metre improvement of mean sight depth is calculated. The aggregated consumer surplus for the Swedish counties Stockholm and Uppsala lies between SEK 59-351 million a year. Welfare measures of improved water quality differ depending on what determinants of recreational demand are included in the model, and on how travel time is treated.