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

Public decision-makers require information on the benefits and costs of policies for groundwater 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. Results indicate that households' knowledge of contamination, perception of risk, and presence of children determine whether they undertake averting actions and that their expenditure levels are higher if young children are present. The estimates obtained through averting expenditures analysis have a sound theoretical basis and are of sufficient magnitude that they merit consideration in groundwater policy decisions.