Module 5 Introduction

Economists have categorised three approaches for estimating the economic value of ecosystem services:

  • Valuation using conventional market (market-based approach)
  • Valuation using implicit market (revealed preference)
  • Valuation using artificial market (stated preference)

In each approach, there are a number of methods or techniques that can be employed to determine the economic value of ecosystem services. These valuation methods are designed to assign value to different ecosystem services under different assumptions while accounting for the complexity of the natural environment. Therefore, the selection of appropriate valuation methods is determined by the type of ecosystem service being valued. Details of valuation methods are given in the additional resources for readings. It should be noted that some of the methods require technical details on statistical and econometric analyses. As such, econometric modelling using popular econometric packages, such as Stata, SAS, SPSS, E-Views, and others, are useful and important in estimating the parameters. Based on the parameter estimates in the model, the economic value of an ecosystem serviced can be estimated.