Driving Resilience in the Great Lakes

Benefits transfer is a research approach that relies on estimates of existing economic values in one context to estimate economic values in a different context. There are numerous challenges and cautions to consider when using benefits transfer, however, when implemented correctly, with the recognition that the estimates are not intBenefits transfer is a research approach that relies on estimates of existing economic values in one context to estimate economic values in a different context. There are numerous challenges and cautions to consider when using benefits transfer, however, when implemented correctly, with the recognition that the estimates are not intended to be precise, benefits transfer is accepted as a suitable method for estimating non-market benefits in various contexts.

Benefits transfer is commonly used in economics, and there is a well-developed literature on how to correctly apply this method. Primary approaches, described in the sections below, rely on data generated by the authors and typically require a significant amount of time, expertise, and financial resources. For this reason, researchers often use the benefits transfer approach to estimate non-market values.ended to be precise, benefits transfer is accepted as a suitable method for estimating non-market benefits in various contexts.

Stated preference methods rely on survey questions that ask individuals to make a choice, describe behavior, or state directly what they would be willing to pay for the non-market good or service being evaluated. Stated preference methods are based on the notion that there is some amount of market goods and services that people would be willing to trade off so they can benefit from a non-market good. This is often measured in terms of willingness to pay. An advantage of stated preference methods is that they include the ability to estimate both use values and non-use values.

Revealed preference methods rely on choices people make in related markets to infer the value of a nonmarket good or service. The most common revealed preference methods are the hedonic pricing, travel cost, and averting behavior methods. Hedonic methods use statistical analysis to estimate the influence of different factors on observed market prices. For example, researchers often cite hedonic studies that infer the value of resilience activities by comparing price differences between properties that have incorporated habitat or environmental functionality improvements (or that are located close to such improvements) and those that have not.

Avoided cost analysis determines the marginal cost of providing an equivalent service in another way. For example, reducing potential stormwater volume discharged to a municipality’s storm sewer infrastructure can avoid costs associated with repairing that system, and/or reduce the size of concrete pipe needed during upgrades. Similarly, in areas where resilience projects can reduce the risk of future flooding, this can offset (or delay) the need to undertake flood damage repairs. Avoided costs should only be used to measure benefits when they would be incurred in absence of the planned resilience scenario.

Production function approaches value environmental goods and services based on their impact on production. They are based on the idea that environmental attributes can affect a sector’s production function, and that the effect on production can be valued at market prices. For example, high quality nature-based recreation sites can positively affect economic output associated with tourism.