Worth of watersheds: A producer surplus approach for valuing drought mitigation in Eastern Indonesia

Published

Journal Article

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.

Full Text

Duke Authors

Cited Authors

  • Pattanayak, SK; Kramer, RA

Published Date

  • February 1, 2001

Published In

Volume / Issue

  • 6 / 1

Start / End Page

  • 123 - 146

International Standard Serial Number (ISSN)

  • 1355-770X

Digital Object Identifier (DOI)

  • 10.1017/S1355770X01000079

Citation Source

  • Scopus