1. 1 האם נוכל לתת ערך כלכלי למגרש משחקים בעיר ? יכולים לעזור ? CVM, TCM האם מירה ברון, אנסטסיה טקץ ', אירינה ליבשיץ שטח כלכלה, הפקולטה להנדסת תעשייה וניהול הטכניון, חיפה mbaron@technion.ac.il, IRSA, 10/1/2010 תל אביב

2. 2 Outline ► Open space as a local public good ► Methods for evaluating environmental goods CVM and TCM ► Designing the questionnaire and selecting a sample of playgrounds ► Results for CVM and TCM ► Conclusions

3. 3 Open Spaces: Do We Need Them? ► Open spaces play a crucial role in the life of a city, but are they more important than using the land for residential construction, shopping centers, schools or hospitals? ► Comparison can be done by investigating a parcel of land. It requires to assign a monetary value to the various land uses ► How do we assign a value to open space?

4. 4 Children’s Playgrounds ► Our interest are parks and gardens within the urban area, and specifically children’s playgrounds (pocket gardens) ► They are aimed for children under the age of 6, and aimed to develop children’s physical and social skills ► They often include see-saw, ladders, junky board, climbing facilities, swings

5. 5 Playgrounds Are Local Public Goods Urban open spaces and playgrounds are local public goods unlike the classical public good, e.g., defense, lighthouses… They are: ► Nonexcludable – once they are produced, it is impossible or very costly to exclude anyone from use ► Nonconsumptive – one person’s enjoyment of the good does not diminish its availability for others ► Their benefits are limited in space

6. 6 Economic Valuation Methods Many methods of valuation of non-market goods are available. In this research we use: ► Revealed Preference Method oTravel Cost Method (TCM) ► Stated Preference Method oContingent Valuation Method (CVM)

7. 7 TCM ► Travel cost method is a method of measuring the use value (UV) of an environmental amenity by using the costs that individuals pay to travel to the site, a proxy for the price of the amenity. ► In our case no monetary expenses for travel exist, just time spent in walking and on the site ► Demand curve for the environmental amenity can be constructed by simulating changes in entrance fees. ► The area under the demand curve, the consumer surplus, estimates the benefits of the good.

8. 8 Stated Preference Methods-CVM ► Contingent valuation method (CVM) elicits preferences about the resource’s value among the relevant population via a survey where the participants are asked directly about their valuation ► Willingness-to-Pay (WTP) for a carefully defined good or service which improves utility. ► Willingness to Accept (WTA) to avoid reduction in utility

9. 9 Questionnaire Design ► Details of respondents’ visits to the playground (frequency, duration, distance walked), provide data for TCM ► Hypothetical questions - WTP ► Socioeconomic background

10. 10 Playgrounds Selection ► From 250 playgrounds in the city of Haifa, Israel, we selected 12 playgrounds where we interviewed 244 adults (parents or relatives), who accompanied children in May-June 2007 The criteria for selection of playgrounds were: ► Socio-economic level of neighborhood ► Closeness to a road ► Present repair condition

11. 11 TCM RESULTS

12. 12 Frequency of Visits Total % Several times a day 30.3 Once a day 27.5 Two-three times a week 33.2 Once a week 8.2 Number interviewed 244 Total % 100.0

13. 13 One Way Walking to Playground Total % Less than 5 minutes 50.4 5-10 minutes 32.0 10-15 minutes 12.3 15-20 minutes 5.3 Number interviewed 244 Total % 100.0

14. 14 Time Spent in Playground Total % Less than half an hour 4.9 0.5-1.0 hour 24.2 1.0-2.0 hours 55.7 More than 2 hours 15.6 Number interviewed 244 Total % 100.0

15. 15 Estimating Relationship between Number of Visits and Time spent in Recreation ► Time is converted into money using the individual’s alternative value of time (often a percentage of wage rate) ► Relationship is analyzed for each playground separately between number of visits and value of time.

16. 16 Number of Visits vs. Price of Visit

17. 17 Estimating the Demand Curve ► Entrance fee is increased moderately, in a method suggested by Hotelling (1949) ► Entrance fee substitutes the cost (value of time)

18. 18 Demand Curve and Consumer Surplus Using Standard Tobit method ► Demand curve for playground is: Visits per month =1062 - 7.2322* Entrance fee ► Consumer surplus is: ► 1/2*146.89*1062= 78,023 NIS per month (936,272 NIS per year). About $20,000 per month.

19. 19 Demand Curve for Playground T

20. 20 CVM RESULTS

21. 21 WTP Questions Three questions were asked: ► How much would you be WTP to improve the facilities in the playground? ► How much would you be WTP for a new playground? ► Consider the hypothetical scenario where the municipality dismantles this playground. How much would you be WTP to avoid dismantling?

22. 22 Distribution of Dependent Variables MONEY_IMPR MONEY_NEW MONEY_PRES MONEY_PRES

23. 23 Refusal to Pay ► The percentage who refuse to pay (WTP=0) varies between 57-72%. ► It can be interpreted as protest response (‘we pay enough taxes…’) ► or real ‘zero’ value. ► We have not followed the WTP questions, a procedure which is often used, and we cannot separate the responses.

24. 24 Econometric Analysis ► Since the answers are only positive, and we cannot assume a normal distribution of the dependent variable, we cannot analyze it using OLS We used three procedures: ► Standard Tobit ► Heckman’s two steps Tobit procedure ► Ordered Probit

25. 25 Examining Models ► The models were examined using Benefit Transfer, making predictions for various scenarios. ► The best results are derived using ordered Probit

26. 26 ► The value of MONEY_PRES, the money people are WTP to avoid dismantling of the playground, seems as the best value for the playground in its current condition. The value varies with the socio-economic level of the neighborhood, NIS 20-21 (about $5 per respondent per month).

27. 27 WTP VALUES per person per month WTP>0 [full sample] Type of neighbor- hood WTP improve- ment WTP new playground WTP preservation High socio- econ level 21.34[9.52]21.57[5.08]19.69[4.73] Medium socio- econ level 20.71[8.59]21.11[4.13]19.76[3.77] Low socio- econ level 19.66[8.40]20.00[5.00]21.33[4.67]

28. 28 Converting to Land Values ► How can we use the results? Calculate the sum of WTP per playground, by multiplying the value per person by the number of visitors (public good) Calculate the sum of WTP per playground, by multiplying the value per person by the number of visitors (public good)

29. 29 Comparing Land Values Our major question is: ► Are open spaces the proper land use or residential construction, or shopping centers, schools or hospitals? ► According to the classical urban economists, Alonso (1960) Muth (1969) a land use is determined by the highest bid per a parcel of land.

30. 30 ► Using CVM (WTP) we calculate the value of the non-market good-playground. ► Using TCM we calculate consumer surplus ► We compare these values with the market prices of land for other land uses. ► The values enable to calculate whether investment in upgrading a playground are economical

31. 31 Conclusions ► Playgrounds have a value that can be estimated by WTP or TCM (or HPM) ► We found positive WTP which are not negligible. The percentage willing to pay varies between 21- 46% ► Using TCM we estimate the consumer surplus for each playground ► We disregarded the ecological value and the option value of flexibility in future land uses, which increase the area’s value.

32. 32 Future Research ► Use of open space by teenagers / elderly / adults ► Can different age groups use the same area in different hours or simultaneously. If yes, we have to add the benefits of the various age groups in calculating the value of land ► Counting the number of users in various hours ► A software to locate new playgrounds or close playgrounds (Dunayevski and Baron, 2010)

33. 33 Thank you for attention