Worth of watersheds: A producer surplus approach for valuing drought mitigation in Eastern Indonesia
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This study combines hydrological modeling with applied micro-econometric techniques to value a complex ecosystem service: drought mitigation provided by tropical forested watersheds to agrarian communities. Spatial variation in current base-flow allows estimation of drought mitigation values as the marginal profit accruing to agricultural households. The paper shows that this uncommon focus on producer (not consumer) surplus measures is appropriate for valuation as long as markets for commodities related to the environmental services are complete. For the typical household, the estimated marginal profit is positive, validating the central hypothesis that baseflow makes positive contributions to agricultural profits. There is some evidence, however, that increased watershed protection will increase profits through greater baseflow only in watersheds with a unique mix of physio-graphic and climatic features. The paper evaluates and provides some support for the hypothesis, put forward by hydrological science and the Indonesian Government, that protected watersheds can supply latent and unrecognized ecosystem services to local people.
Published Version (Please cite this version)10.1017/S1355770X01000079
Publication InfoKramer, Randall A; & Pattanayak, Subhrendu K (2001). Worth of watersheds: A producer surplus approach for valuing drought mitigation in Eastern Indonesia. Environment and Development Economics, 6(1). pp. 123-146. 10.1017/S1355770X01000079. Retrieved from http://hdl.handle.net/10161/6747.
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Juli Plant Grainger Professor of Global Environmental Health
Randall Kramer is the Juli Plant Grainger Professor of Global Environmental Health in the Nicholas School of the Environment and deputy director of the Duke Global Health Institute. Before coming to Duke in 1988, he was on the faculty at Virginia Polytechnic Institute and State University. He has held visiting positions at IUCN--The World Conservation Union, the Economic Growth Center at Yale University, and the Indonesian Ministry of Forestry. He has served as a consultant to t
Oak Foundation Environmental and Energy Policy Professor
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