Valuing Water Quality as a Function of Water Quality Measures∗

Employing a unique and rich data set of water quality attributes in conjunction with detailed household characteristics and trip information, we develop a mixed logit model of recreational lake usage. Our empirical analysis shows that individuals are responsive to the full set of water quality measures used by biologists to identify the impaired status of lakes. WTP estimates are reported based on improvements in these physical measures. This implies that cost benefit analysis based on water quality measures can be used as a direct policy tool. ∗The authors would like to thank participants in seminars at Resources for the Future, the University of Minnesota, and the Heartland Conference for helpful comments on earlier drafts of this paper. All remaining errors are, of course, our own. Funding for this project was provided by the Iowa Department of Natural Resources and the U.S. Environmental Protection Agency’s Science to Achieve Results (STAR) program. Although the research described in the article has been funded in part by the U.S. Environmental Protection Agency’s STAR program through grant R830818, it has not been subjected to any EPA review and therefore does not necessarily reflect the views of the Agency, and no official endorsement should be inferred. †Contact author: 260 Heady Hall, Dept. of Economics, Iowa State University, Ames, IA 50011-1070. Phone: (515) 294-4964. FAX: (515) 294-0221. E-mail: [email protected]