How large is the extent of the market for public goods: evidence from a nationwide contingent valuation survey
To assess the extent of the geographic area over which to sum vertically the public-good benefits of removing two dams and restoring salmon populations, households were surveyed throughout the US. Households were asked a dichotomouschoice contingent-valuation question regarding their willingness to pay higher federal taxes for ten years to remove the dams and restore salmon populations. While the distance from the site of the dam removal is statistically significant and negative in the logit willingness-to-pay equation, benefits per household fall off slowly and the extent of the market is nationwide. With a majority of households living outside the immediate area of the dam, the rest of the US households reflect 97% of the national benefits for dam removal and salmon restoration. This example suggests that failure to account for the national public-good market can result in a serious underestimate of the value of public goods.
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