353-357 Carr.p65

Throughout the world, there are many threats to existing coral reefs. Global warming (1), mining (2), overfishing (3), and water pollution (4) all threaten the viability and health of coral reefs. Although these threats are well documented, programs to protect coral reefs are spotty and underfunded. Advocates for coral reef protection argue that there are many benefits to maintaining coral reefs, such as recreation (5), fish habitat (6), and beach protection (7). It is only recently, however, that economic studies have begun to discuss how to measure the direct and indirect benefits from coral reefs. Studies have examined the benefits of reef resources (8, 9), recreation (10, 11), marine parks (12–14), and protected areas (15). However, quantification of the value of coral reefs is rare and badly needed. This paper applies a well known economic valuation method, the travel cost model, to measure the value of the Great Barrier Reef, Australia. Although the travel cost method has been applied to a host of outdoor recreation sites, most applications entail domestic visitation where travel is predominantly by car. In order to apply this methodology to ecotourism in low latitude countries, the method has to be extended to capture international travel that is largely by plane. This raises a serious measurement issue because the cost of air travel is not well correlated with distance. Many tourists come on packages and the travel cost is not clearly delineated. Some tourists visit on special low fares raising questions about which fares to use. Finally, some countries have no observed visitors and so there are no actual fares. The analyst is consequently faced with several alternative measures of travel cost: actual reported fares, consistent fares from travel agents, and distance. In this study, we compare an OLS estimation using actual and travel agent fares with a 2-stage least squares estimation using all 3 measurements. Another important methodological issue that we address in this study concerns the fact that many origins may have no visits to the site. Estimation of the demand function must take these zero visits into account through either a participation function or an estimation procedure that truncates the distribution. We utilize both methods by exploring a participation function in one model and using tobit analysis in the other. Another important issue is choosing the functional form of the travel cost demand function. Analysts tend to examine functional forms for travel cost models as though they are simply a goodness-of-fit issue. However, because these models of demand are being used to estimate consumer surplus, the functional form can have significant impacts on the final results. Some functional forms, such as the log-linear model, are attractive because they provide nonlinear demand functions with few parameters. However, the log-linear models tend to result in higher consumer surplus estimates because they assume prices go to infinity as quantities go to zero. We contrast the log-linear model with a polynomial model of demand in order to show the importance of these assumptions. In the following section, we review the methods used in the study in detail. We then discuss the empirical results. Finally, we conclude the paper with some policy observations concerning international travel cost modeling and the value of coral reefs.