Mira G. BaronFaculty of Industrial Engineering and Management

Technion-Israel Institute of Technology, Haifa 32000, ISRAEL

mbaron@technion.ac.ilSubmitted in :

5th Israeli-British/Irish Workshop in Regional ScienceRamat Gan, ISRAEL, April 29-30, 2007

Regional Development: Agriculture vs. Parks :

Case Study, Hula (ISRAEL)

3

The Structure of the Presentation Motivation; The dilemma of the Hula (Upper Galilee)-

agriculture vs. a park; Data; Conclusions.

4

Sustainable DevelopmentWorld Commission on Environment and

Development: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, 1987).

5

Case Study: Upper Galilee

A concentration of nature reserves, national parks, open spaces, water and agriculture.

A growing tourism industry-hotel rooms, zimmers (B&B), restaurants.

Tourism is a growing employment provider.

6

The Dilemma in the Region Is the preferred land use agriculture or

parks? How to ensure employment in the region? Parks charge an entrance fee, but the

proceeds are relatively low.

7

The Dilemma of the Hula In the 50’s draining a swamp. In the 90’s re-flooding the wetland. The dilemma was between non-profitable

agriculture and tourists’ attraction. Can we integrate between agriculture and

recreation? What are the revenues for the land owners?

What are the social benefits.

8

Biodiversity LossThe drainage resulted in a global loss of seven

animal species out of 12 that were endemic. In terms of the region, 119 (20%) species were not recorded in the region after the drainage (Safriel, 1997, pp. 22-23).

9

In 1999 we published a forecast for the expected number of visitors in the Agamon, and for revenues. Mira G. Baron, Natalia Zaitsev and Mordechai Shechter, 1999,

Expected Recreational Benefits of the Hula Economic Analysis, Haifa:NRERC.

The forecast was based on recreationists’ surveys. The Agamon-the recreation attraction was opened in 2004.

The forecast referred to the expected revenues; expected consumer surplus, but almost disregarded the regional contribution.

10

Evaluating the expected number of visitors . 87% of the visitors to Upper Galilee would like to visit the Hula Project. If the park were opened today, and NIS 30 were charged, 380,000 visitors may be expected. Due to the expected increase in population and increase in standard of living we expect an annual increase in the number of visitors by 2- 4% per year. In ten years 460,000- 560,000 visitors are expected, besides overseas ourists.

Expected revenues and benefits were calculated assuming NIS 30 per person is charged. Since 380,000 visitors are expected, annual revenues of NIS 11.4 million are expected in the first year of operation. Under reasonable assumptions, in 25 years of operation a present value in the range of NIS 123- 323 million may be expected.

The expected social benefits were calculated referring to the WTP of interviewees to pay an entrance fee of NIS 30 and higher values. At the first year of operation the benefits are expected to total NIS

14.1 million. In 25 years of operation, a present value of total benefits in the range of NIS 152- 400 million may be expected.

11

Expected Number of Visitors Staying in Accommodation Facilities in Different Periods (thousands)

12

Visitors vs. Sites,1999-2006

1999 2000 2001 2002 2003 2004 2005 2006

Total Tal 98,840 101,679 85,923 80,827 108,303 109,580 106,900 99,556

Hula Reserve 63,023 55,158 51,857 66,184 68,801 82,220 83,586 138,197

Banias 305,536 286,430 155,394 117,736 201,919 207,232 229,809 242,543

Tel Dan 236,450 197,160 152,713 124,339 198,880 197,339 220,808 195,527

Agamon 90,000 137,000 167,000

Total 'Ayun' 100,071 115,371 75,743 77,137 235,918 153,736 132,098 116,281

Total Visitors 803,920 755,798 521,630 466,223 813,821 840,107 910,201 959,104

13

Visitors vs. Sites, 1999-2006

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

19992000

20012002

20032004

20052006

Total Visitors

Total Tal

Total 'Ayun'

Hula Reserve

Banias

Tel Dan

14

Visitors vs. Sites, 2004-2006

50,000

100,000

150,000

200,000

250,000

300,000

2004 2005 2006Years

Vis

ito

rs

Total TalHula ReserveBaniasTel DanAgamonTotal 'Ayun'

15

Hotels and Zimmers Sefat and Golan districts offer both hotels and

‘zimmers’-bed and breakfast (B&B). In 2004 Sefat sub- District hosted 303,800

person-nights in B&B, while Sefat and Golan District hotels provided 476,600 person nights.

The occupancy rate in the area is low. In the country in 2005, 23,600 people were

employed in the hotel industry and the revenues $1,360 million.

What is the regional contribution?

16

Rooms in Hotels and Person Nights

Year Total Northern Dstrc. Zefat and Golan Total Northern Dstrc. Zefat and Golan1995 34,801 6,978 16,018.4 3,008.61996 36,748 7,150 16,145.7 3,050.51997 37,936 7,422 1,068 16,123.0 2,824.1 360.01998 39,389 7,509 1,143 16,687.6 2,922.0 408.01999 41,856 7,826 1,173 18,681.6 3,163.5 430.62000 45,135 8,541 1,264 19,546.5 3,271.0 481.02001 46,143 8,337 1,265 15,113.3 2,231.5 418.72002 46,935 8,295 1,265 14,606.6 2,083.7 412.02003 46,368 8,064 1,273 15,095.2 2,258.2 452.42004 46,375 8,316 1,290 18,019.0 2,562.6 476.6 2005 46,716 8,519 1,312 20,357.8 2,866.3 501.5

2006 I-IX 46,548 8,513 1,321 15,866.8 1,869.8 344.4

Rooms Person-Nights

17

Can we resolve the conflict between agriculture, and parks?

Can we use land values to resolve the conflict?

Agriculture - a good produced for private use with externalities (both positive and negative).

A park - a public good.

18

19

Land Values Land-use is determined by the use with maximum

willingness to pay for the land. In residential area the value of land is determined by the

demand for housing, commerce, transportation. In industrial land-use the value of land is determined by

the profitability in a certain location. The maximal willingness to pay is the profit derived.

In agricultural land (as in industry), the value of land is determined by profitability, disregarding externalities.

How is the value of land determined in a park? What is the land-use with maximum WTP?

20

Value of Land of a Park (or Open Space) In public goods we have a market failure

and the price is partial. How to estimate the value?

CVM-WTP, WTA: hypothetical behavior. TCM-revealed behavior. HPM-revealed behavior.

21

From social perspective: Land value for agriculture=profitability +

value of externalities. Land value for open space/park = CVM or

TCM or HPM + externalities The maximal value ‘wins’ the land.

22

Example, TCM (Travel Cost Method)

We travel long distances to enjoy a rice field, a lake or a forest, or visit to a park.

We deal with a revealed behavior of use-value, not a hypothetical market.

23

Externalities According to Coase Theorem the gainers (e.g.,

hotel or restaurant owners) have to compensate the land owners of uses that generate externalities to attain a social optimum.

An estimate of the externalities:

The impact on the region in economic terms-does the land-use generate employment in the region in other industries, i.e., hotels and/or restaurants?

24

The use of hotels can teach us on the positive externalities generated by agriculture/open space/parks.

25

26

Can we analyze the tourism patterns in various regions, and deduct on the contribution to the tourism industry of agriculture/open space/parks?

Probably yes! Can we add the value of externalities to the

demand for land?

27

Summary We can use CVM, HPM, TCM to estimate

the value of open space or parks The stay in hotels and B&B, a

complementary good to recreation, can be used in the three land-uses. Analyzing different regions will identify the contribution of each activity.

28

Summary (cont.) How can we resolve the dilemma of the Upper

Gaillee and the Hula? Agriculture: calculate the profitability, add the

value of externality via contribution to visits in the region and tourism. Deduct negative externalities, i.e. nitrification of land.

Park: calculate revenues + consumer surplus + contribution to tourism industry.

Divide each value by number of acres, to derive maximal value.

29

Integrating the externalities into the value of land might show that parks are more desirable than agriculture, opposite to the result of referring just to revenues.

The public perspective has to be concerned with increasing employment opportunities in a region, neglecting it and emphasizing the private perspective is misleading.

30

Thank You!

1. Monetary Valuation Methods and Techniques

Dose - R

espon

se fun

ctions

Travel Cost

Benefit Transfer

Control cost(abatement cost)

Clean-up cost

Replacement cost

Exp

erts assessm

ent

Stated

Preferen

ces meth

ods

(direct methods)

Contingent Valuation CVM

Choice modeling (Conjoint analysis)

Choice experiments

Contingent ranking

Contingent rating

Paired comparisonsR

evealed P

references m

ethod

s (in

direct methods)

Hedonic Pricing HPM

property market

labormarket

Health production functions

Cost of illness (COI)

Averting behaviour