Worth of watersheds: a producer surplus approach for valuing drought mitigation in Eastern Indonesia

Pattanayak, S. K. and Kramer, R. A., 2001. Environment and Development Economics

Original research (primary data)
View External Publication Link


This study combines hydrological modeling with applied micro-econometric techniques to value a complex ecosystem service: drought mitigation provided bp tropical forested watersheds to agrarian communities. Spatial variation in current baseflow allows estimation of drought mitigation values as the marginal profit accruing to agricultural households. The payer shows that this uncommon focus on producer (not consumer) surplus measures is appropriate for valuation as long as markets for commodities related to the environmental services are complete. For the typical household, the estimated marginal profit is positive, validating the central hypothesis that baseflow makes positive contributions to agricultural profits. There is some evidence, however, that increased watershed protection will increase profits through greater baseflow only in watersheds with a unique mix of physio-graphic and climatic features. The paper evaluates and provides some support for the hypothesis, put forward by hydrological science and the Indonesian Government, that protected watersheds can supply latent and unrecognized ecosystem services to local people.

Case studies

Basic information

  • Case ID: INT-125-1
  • Intervention type: Combination
  • Intervention description:

    Establishment of Ruteng Park on 32,000 hectares in 1993. The primary conservation goal was to provide greater protection against deforestation threats and to initiate reforestation and land conservation that enhances watershed protection.

  • Landscape/sea scape ecosystem management: Yes
  • Climate change impacts Effect of Nbs on CCI Effect measures
    Drought  Not addressed no measure of effectiveness given. economic outcomes reported only
  • Approach implemented in the field: Yes
  • Specific location:

    Ruteng Park is located in the western part of Flores Island in western Indonesia.

  • Country: Indonesia
  • Habitat/Biome type: Tropical and subtropical forests |
  • Issue specific term: Not applicable


  • Notes on intervention effectivness: Effectiveness of intervention is not provided. Economic benefits reported only
  • Is the assessment original?: Yes
  • Broadtype of intervention considered: Not applicable
  • Compare effectivness?: No
  • Compared to the non-NBS approach: Not applicable
  • Report greenhouse gas mitigation?: No
  • Impacts on GHG: Not applicable
  • Assess outcomes of the intervention on natural ecosystems: No
  • Impacts for the ecosystem: Not reported
  • Ecosystem measures:
  • Assess outcomes of the intervention on people: No
  • Impacts for people: Not reported
  • People measures:
  • Considers economic costs: Yes
  • Economic appraisal conducted: Yes
  • Economic appraisal described:
  • Economic costs of alternative considered: No
  • Compared to an alternative: Not reported

Evaluation methodology

  • Type of data: Quantitative
  • Is it experimental: No
  • Experimental evalution done: Not applicable
  • Non-experimental evalution done: Empirical case study
  • Study is systematic: