Private Options to Use Public Goods : The Demand for Fishing Licenses and the Benefits of Recreational Fishing

This paper develops and applies a new method for estimating the economic benefits of an environmental amenity. The method fits within the household production framework and is based upon the notion of estimating the derived demand for a privately traded option to utilize a freely-available public good. In particular, the demand for state fishing licenses is used to infer the benefits of recreational fishing. Using panel data on state fishing license sales and prices for the continental United States over a fifteen-year period, combined with data on substitute prices and demographic variables, a license demand function is estimated with instrumental variable procedures to allow for the potential endogeneity of administered prices. The econometric results lead to estimates of the benefits of a fishing license and, subsequently, to the expected benefits of a recreational fishing day. These preliminary estimates are compared with results from previous studies using survey (contingent valuation) and travel cost approaches