Economic Valuation Andalusia

Description of valuation study conducted – DEMAND

The study conducted analyses the demand of Andalusian society (6.7 million residents above 18-years old) with respect to the main public goods provided by mountain olive groves (MOG), including environmental (biodiversity and soil functionality) and sociocultural ones (rural vitality). For this purpose, two levels of improvement in the provision of each public good compared with the current situation have been proposed. Soil functionality is measured by soil erosion, currently accounting for 10 tons of soil loss/hectare and year; reducing 40% and 80% this amount of erosion eroded has been proposed as moderate and significant improvements, respectively. Provision of biodiversity is measured using the indicator ‘number of bird species per farm’, currently accounting for 14 bird species per farm; this provision can be improved by increasing 50% and 100% the value of this indicator (moderate and significant improvements, respectively). Finally, rural vitality is measured as the ‘risk of farm abandonment’ (% of farms lacking succession), currently accounting for 90%; the reduction of this indicator to 70% and 50% levels has been proposed as moderate and significant improvements, respectively.

The choice experiment method has been used as valuation technique, firstly using the Random Parameter Logit (RPL) econometric specification, and secondly using the Latent Class Model (LCM), the latter with a special focus on preference heterogeneity.

An online survey was conducted, using a representative sample of the Andalusian population following a random sampling procedure. Questionnaires were conducted by a panellist company during February to March 2017. Finally, 504 completed questionnaires were collected.

 

PG valuation results – DEMAND

Using the Random Parameter Logit (RPL) econometric specification, the following average individual’s WTP are obtained: value for farmland biodiversity ranges from €0.31 to €0.43 per farm bird species and year; the value of soil loss avoided per hectare (soil functionality) ranges from €0.00 to €0.54 per ton; and value for rural vitality ranges from €0.13 to €0.21 per 1% of reduction in farm risk abandonment.

Using the Latent Class Model (LCM) econometric specification three different groups of population can be clearly identified according to their willingness to pay for the whole set of public goods provided by mountain olive groves: one group of zero willingness to pay (representing 22% of the sample), another with a low willingness to pay and just for rural vitality (14%), and a third larger group (64%) with a high willingness to pay (WTP) for the three public goods under consideration. The results show that variables related to opinions and attitudes, especially those linked to policy implementation, both directly (private/public, local or not, etc.) and indirectly (acceptance of non-agricultural provision, preferences for olive oil, etc.), can better explain group belonging. These results can be of special relevance to internalise social demands in the design of public policies.

 

Description of valuation study conducted – SUPPLY

The study conducted analyses the cost of supply of Andalusian mountain olive growers (approx. 29,500 farmers, managing 211,000 ha) with respect to the main public goods provided by mountain olive groves (MOG), including environmental (biodiversity and soil functionality) and sociocultural ones (rural vitality). For this purpose, improvement in the provision of each public good compared with the current situation has been calculated on the basis of different combinations of environmental friendly practices (soil management practices and phytosanitary treatments) with increasingly stringent requirements to be involved in an agri-environmental scheme (AES). Similar to the demand exercise, soil functionality is measured by soil erosion (soil loss/hectare and year), biodiversity is measured using the indicator ‘number of bird species per farm’ and rural vitality is measured as the ‘risk of farm abandonment’ (% of farms lacking succession).

Choice experiment method has been selected to assess farmers’ willingness to accept (WTA) for participation in the AES proposed (equivalent to the costs of providing increased levels of public goods), also using Random Parameter Logit (RPL) and Latent Class Model (LCM) econometric specifications.

An in-situ survey was conducted, using a representative sample of the Andalusian mountain olive growers following multi-stage sampling (first, random proportional to agricultural districts quotes, and second, random route sampling). Questionnaires were filled using a specialised superior technician, who made the interviews from October to December 2016. Finally, 261 completed questionnaires were collected.

 

PG valuation results – SUPPLY

 

Using the Random Parameter Logit (RPL) as econometric specification, the following average farmer’s WTA (cost of provision) are obtained: the cost of provision for an additional farmland bird species (biodiversity) ranges from €6.5 to €11.0 every year; the cost of provision for avoiding one ton of soil erosion annually (soil functionality) ranges from €22.8 to €38.3 every year; and the cost of having 1% less of farms lacking succession (rural vitality) ranges €1.3 to €1.4 annually.

The Latent Class Model (LCM) econometric specification reveals the existence of two types of mountain olive farmers, clearly differentiated according to their costs of provision, with Type 1 showing lower WTA for signing the proposed AES contracts (and therefore relatively low provision costs), and Type 2 showing higher WTA (thus higher costs of provision of public goods). Type 1 represents 60% of the mountain olive farmers under study, while Type 2 includes the remainder (40%). The main the factor explaining this difference in costs of provision is the yield (i.e. opportunity cost of the income foregone if the AES requirements are fulfilled), but also farm size, biophysical characteristics (specially slope), among others. Further details can be found in Villanueva et al. (2017).

 

 

 

 

 

 

Literature:

Granado-Díaz, R.; Villanueva, A.J.; Gómez-Limón, J.A.; Rodríguez-Entrena, M. (2018). Análisis de la heterogeneidad de la demanda de bienes públicos procedentes del olivar de montaña en Andalucía. ITEA-Información Técnica Económica Agraria, 114(2): 158-182. http://dx.doi.org/10.12706/itea.2018.011

Villanueva, A.J.; Gómez-Limón, J.A.; Rodríguez-Entrena, M. (2017). Valoración de la oferta de bienes públicos por parte de los sistemas agrarios: el caso del olivar de montaña en Andalucía. Economía Agraria y de los Recursos Naturales, 17(1), 25-57. http://dx.doi.org/10.7201/earn.2017.01.02.