Valuing Environmental Quality Changes Using Averting Expenditures: An Application to Groundwater Contamination

Abstract

Public decision-makers require information on the benefits and costs of policies for groundwater quality protection. The averting expenditures method for valuing environmental improvements is examined and used to approximate the economic costs of groundwater degradation to households in a southeastern Pennsylvania community. Regression results indicate that averting expenditures vary with households' knowledge of contamination, perceptions of a contaminant's health risk and presence of young children in the household. The estimates obtained through averting expenditures analysis have a sound basis in theory and are of sufficient empirical magnitude that they merit consideration in federal, state and local groundwater policy decisions.