Does Omitting Downstream Water Quality Change the Economic Benefits of Nutrient Reduction? Evidence from a Discrete Choice Experiment

Discrete choice experiments have been extensively used to value environmental quality; however, some important attributes may be often omitted due to design challenges. In the case of agricultural water pollution, overlooking downstream water quality benefits could lead to biased estimates and misinterpretations of local water quality attributes presented in the choice experiments. Using a split-sample design and a statewide survey of Iowa residents, we provide the first systematic evaluation of how households’ willingness-to-pay for water quality change when downstream water quality benefits, hypoxic zone reduction in our case, are omitted. We find that omitting non-local water quality attributes significantly reduces the total economic value of nutrient reduction programs but does not bias the marginal willingness-to-pay for local water quality attributes. We also find suggestive evidence showing that such omission, in line with the theoretical prediction, only changes the preferences of respondents who are aware of the downstream impacts of local water quality improvement plans. In addition, our results show that providing information on the non-local water quality benefits of nutrient reduction makes respondents less informed about the water quality issues more likely to support the water quality improvement plans.