Regional Development:
Agriculture vs. Parks :
Case Study, Hula (ISRAEL)
Mira G. Baron
Faculty of Industrial Engineering and Management
Technion-Israel Institute of Technology, Haifa 32000,
ISRAEL
[email protected]
Submitted in:
5th Israeli-British/Irish Workshop in Regional Science
Ramat Gan, ISRAEL, April 29-30, 2007
The Structure of the Presentation




Motivation;
The dilemma of the Hula (Upper Galilee)agriculture vs. a park;
Data;
Conclusions.
3
Sustainable Development
World 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).
4
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.
5
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.
6
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.
7
Biodiversity Loss
The 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. 2223).
8

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.
9




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.
10
Expected Number of Visitors Staying in Accommodation
Facilities in Different Periods (thousands)
11
Visitors vs. Sites,1999-2006
1999
2000
2001
Total Tal
98,840 101,679
Hula Reserve
63,023
55,158
2002
2003
2005
2006
85,923
80,827 108,303 109,580 106,900
99,556
51,857
66,184
68,801
2004
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
12
Visitors vs. Sites, 1999-2006
1,000,000
900,000
800,000
Total Visitors
700,000
Total Tal
600,000
500,000
Total 'Ayun'
400,000
Banias
300,000
Tel Dan
Hula Reserve
200,000
100,000
0
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
13
Visitors vs. Sites, 2004-2006
300,000
Visitors
250,000
Total Tal
Hula Reserve
Banias
Tel Dan
Agamon
Total 'Ayun'
200,000
150,000
100,000
50,000
2004
2005
Years
2006
14
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?
15
Rooms in Hotels and Person Nights
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006 I-IX
Total
34,801
36,748
37,936
39,389
41,856
45,135
46,143
46,935
46,368
46,375
46,716
46,548
Rooms
Person-Nights
Northern Dstrc. Zefat and Golan
Total Northern Dstrc. Zefat and Golan
6,978
16,018.4
3,008.6
7,150
16,145.7
3,050.5
7,422
1,068
16,123.0
2,824.1
360.0
7,509
1,143
16,687.6
2,922.0
408.0
7,826
1,173
18,681.6
3,163.5
430.6
8,541
1,264
19,546.5
3,271.0
481.0
8,337
1,265
15,113.3
2,231.5
418.7
8,295
1,265
14,606.6
2,083.7
412.0
8,064
1,273
15,095.2
2,258.2
452.4
8,316
1,290
18,019.0
2,562.6
476.6
8,519
1,312
20,357.8
2,866.3
501.5
8,513
1,321
15,866.8
1,869.8
344.4
16




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.
17
18
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?
19
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.
20




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.
21

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.
22
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?
23

The use of hotels can teach us on the
positive externalities generated by
agriculture/open space/parks.
24
25


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?
26
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.
27
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.
28


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.
29

Thank You!
30
1. Monetary Valuation Methods and Techniques
Hedonic Pricing HPM
Travel Cost
Control cost
Clean-up cost
Replacement cost
Experts
assessment
(abatement cost)
Stated Preferences methods
Health production functions
(direct methods)
Cost of illness (COI)
(indirect methods)
Averting behaviour
Dose - Response functions
labor
market
Revealed Preferences methods
property
market
Benefit Transfer
Contingent Valuation
CVM
Choice modeling
(Conjoint analysis)
Choice experiments
Contingent ranking
Contingent rating
Paired comparisons