The Two-stage Hedonic Wage Approach: A Methodology for the Valuation of Environmental Amenities
Journal of Environmental Economics and Management
This paper extends the hedonic wage model to a two-stage model in which willingness to pay may be estimated for specific amenities. In concert with supply relationships, which may be estimated independent of the hedonic model, these willingness to pay functions allow for the computation of the value of changes in the level of the amenity. The technique has several important advantages over other valuation techniques, including less stringent data requirements and fewer econometric problems such as intractable identification problems and truncation biases. The model is applied to freshwater fishing and benefits associated with changes in fishing quality are estimated, both generically and through specific water quality improvements.